MetroGlass expects first-half profit to miss prospectus forecast due to building constraints

Wednesday 26th August 2015

Metro Performance Glass expects first-half profit to be below its prospectus forecast as capacity constraints in New Zealand's construction industry weighs on the country's largest glass processor.

Profit will be between $10 million and $11 million in the six months ending Sept. 30, below its July 2014 prospectus forecast for profit of $12.1 million, chairman John Goulter told shareholders at its first annual meeting since floating on the NZX last July. Sales will be in line with its prospectus forecast of $94.1 million.

The company also said 2016 annual profit will be between $20 million and $22 million in the year ending March 31, on sales of $190 million. In May, MetroGlass reported profit of $9.6 million in the eight months ended March, on $115 million in sales, after acquiring Metroglass Holdings before its initial public offering last year.

New Zealand building consents are at record highs, driven by a shortage of houses in Auckland and the Christchurch rebuild, with actual work underpinned by residential construction. Still, MetroGlass, which has more than half of New Zealand's glass processing market, sees capacity constraints in the building industry as keeping a lid on sales.

"Industry capacity constraints have led us to believe the current building cycle will last longer but have a lower peak than was anticipated last year at the time of IPO," Goulter told shareholders in speech notes published on the NZX. "This changed landscape and its associated delays to both residential and commercial projects are having an impact on our short-term financial performance. That notwithstanding, we are cautiously optimistic."

The company will focus on customer service to keep market share and lift growth, while also investing in building capacity.

Goulter said he could understand that investors were "disappointed with the recent performance of our share price", with the stock having dropped as low as $1.30 earlier this week, below the $1.70 offer price last July when it raised $244.2 million. The stock reached a high of $2.03 in October, and rose 0.8 percent to $1.35 in trading today.

Of the money raised last year, some $230.5 million was used to buy the Metroglass assets from private equity owners Crescent Capital and Anchorage Capital and senior management, with the private equity owners keeping a combined stake of 18.5 percent and management retaining 3.8 percent. Some $10.9 million covered the cost of the offer and $2.8 million went towards reducing debt.

BusinessDesk.co.nz

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