Sharechat Logo

UPDATE: Metro Glass shares tumble after weaker-than-expected guidance

Friday 3rd February 2017

Text too small?

Metro Performance Glass shares dropped 17.5 percent after the company said annual profit was likely to be similar or lower than the prior year as costs were higher than expected and local sales were behind expectations on dwindling work in Canterbury and a dip in Wellington. 

The Auckland-based company, which has more than half the country's glass processing market, said it expects net profit to be in a range of $19 million to $20.5 million in the year ending March 31 versus a profit of $20.5 million a year earlier. Revenue is expected to be $240 million-to-$245 million versus $188 million in the prior period. The guidance includes seven months of trading from Australian Glass Group with sales estimated to be in a range of $27 million to $29 million. Metro Glass bought AGG in August for A$43.1 million.

The shares, which listed at $1.70 on the NZX in 2014, last traded at $1.56.

Nick Dravitzki, equity analyst at Devon Funds Management, said the market was clearly disappointed by the earnings number, which was at least 10 percent below what was expected.  "The issue seems to be their cost base is higher than expected," he said. 

The company said "sales have recently lagged behind the company’s expectations due to a faster‐than‐expected slowdown in the Canterbury residential market and a short‐term drop in activity in Wellington following the November 2016 earthquake." 

In a conference call with analysts and investors chief executive Nigel Rigby underscored that the company is "going well" in a revenue sense but said a recent learning curve as it scales up production, distribution and technological capability has increased costs. 

He expects the situation to improve after the current financial year. "Certainly, over the three months April to June we'd be looking for improvement," he said.  He said "it's been an interesting four or five months" with Canterbury slowing, the earthquake in Wellington causing delays and the company's learning curve "but don't see that as a baked in scenario." 

He also underscored that momentum in the commercial project markets has continued to fluctuate, with certain large projects in particular facing protracted installation timetables. "This volatility has resulted in inefficiencies for Metro Glass in production planning and inventory and labour management," according to the company.  

Rigby said issues in the commercial sector had definitely impacted the company's earnings, in particular the delays. He noted, however, "it's the reality of the sector" and something the company is going to have to get used to, in particular in a booming market.

He was upbeat about AGG. "We are now five months into the acquisition and it is tracking to expectations... There are no surprises to date," said Rigby. 

Earlier, chairman John Goulter said the supportive construction market outlook will ensure revenue growth for several years but the company needs to focus further on automation, process and cost saving across manufacturing, logistics and glazing.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ shares fell on global growth concerns
New Zealand dollar becalmed ahead of CPI data
Billionaire Aussie miner moves businesses to NZ in 'quixotic' CER gambit
RBNZ plucks bank capital numbers out of the air: Reddell
Genesis coal burn reached 5-yr high in 'unprecedented' conditions
Govt part-funds another $11m of low-emissions transport projects
January 22nd Morning Report
NZ dollar stalled ahead of CPI data; IMF trims global outlook
MARKET CLOSE: NZ stocks gain; investors seek value ahead of earnings season
NZ dollar drifts lower ahead of CPI; China GDP as expected

IRG See IRG research reports