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Mercer cuts FY earnings guidance on late sales, signals big deal with multi-national in the pipeline

Friday 21st June 2013

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Mercer Group, the stainless steel fabricator, cut its annual earnings forecast after two big equipment sales missed the June financial year, though it’s upbeat about talks to licence its technology to a large multinational company. 

Earnings before interest, tax, depreciation, and amortisation will be between $2.2 million and $2.5 million in the 12 months ending June 30, the Auckland-based company said in a statement. While that’s an improvement on last year’s EBITDA of $1.1 million, it was previously expecting earnings of between $3 million and $4 million. 

Mercer has signed a heads of agreement to license its S-Clave technology with a big multinational, subject to 30 days of due diligence, and if finalised “would have a positive impact on the business.” It didn’t name the company.

The company is also predicting a strong first half in the 2014 financial year with a solid forward order book, particularly in the stainless business. 

“The interiors business continues to improve and the company believes it is well-positioned to capitalise on the forecast growth in the construction sector,” the company said. 

Mercer said it has also expanded its debt facility with Bank of New Zealand to $8.8 million “which can be drawn against when opportunities present themselves.”

The shares, which trade infrequently, were unchanged at 17 cents today, having shed 15 percent this year. That values the company at $40.7 million. 

The stock plunged from about 36 cents in 2008, and was further punished when it halted repayments to South Canterbury Finance, when the late Allan Hubbard was a cornerstone shareholder, after breaching its banking covenant.

Last July, the company paid $1 million for a controlling stake in Titan Slicer, which designs and makes equipment to slice meats and cheese.

In the past year Mercer has been rebranded, upgraded its financial systems and shifted its offices and distribution centre to a new headquarters in Onehunga, Auckland.

Mercer hired former deputy chief of Fairfax New Zealand and PMP chief Rodger Sheppard to head the company in 2011 after a strategic review of the business opened the door for former CEO Howard Milliner to leave.

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