Wednesday 27th April 2011 1 Comment
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Mercer Group has issued an earnings downgrade but says it is compliant with banking covenants and it is reviewing all of its businesses.
In December last year the stainless steel product manufacturer signalled earnings before interest and tax in the year to June 30, 2011 would be close to break even. This compared with an 2009 EBIT deficit of $1.73 million.
Today it forecast an EBIT loss in the range $2.6 million to $3.0 million in the year to June 30, 2011, after reporting an interim loss of $1.8 million.
The company, which is part owned by interests associated with Timaru businessman Allan Hubbard, has previously said its two Christchurch workshops suffered relatively minor damage in February 22 earthquake and reopened on February 28.
Today it said trading conditions for the Mercer Products sink business in New Zealand and Australia had deteriorated since Christmas. Sales are down 21% on a year ago but are expected to improve as the Christchurch rebuild gets under way and housing construction lifts.
Mercer Medical has secured new orders worth $1.3 million but these will be supplied in the 2012 financial year, while Mercer Stainless has reduced margins but is entering 2012 financial year with a stronger order book than twelve months ago.
"The second half result is disappointing but the group is well funded and prospects for 2012 are encouraging. The group is compliant with its bank funding covenants but will be renegotiating its interest cover covenant with the bank over coming months to better reflect current trading conditions," the company said.
Westpac earlier extended the company's bank facilities until December 31, 2011.
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