Sharechat Logo

RESEND: China acquisition to underpin Methven profit growth

Wednesday 30th July 2014

Text too small?

Methven is counting on its new Chinese manufacturer to secure its supply and grow the company's profitability as the tap and shower maker targets up to 25 percent earnings growth this year. 

At its annual shareholder's meeting, new chief executive Daniel Banfield told investors the company's current performance wasn't in line "with our capability or expectations" and the addition of Methven Heshan, formerly Invention Sanitary, would increase the competitiveness of the Auckland-based bathroom fittings business. The company paid $10 million in cash and scrip for the Guandong-based manufacturer, which it said will start adding US$2 million to net profit after tax from September.

"The big thing in terms of earnings growth is realising the potential of Methven Heshan. Confidence is really high that we're going to deliver US$2 million net profit per year," Banfield told BusinessDesk after the meeting. "It secures our supply chain. We've worked with Invention in the past for 10 years. They only supplied the Methven group and we saw an opportunity to buy that business, realise the margin ourselves, and get a more flexible supply chain."

Methven reported an 8.6 percent fall in annual profit to $4.7 million in the year ended March 31, its fifth year of profit decline according to its annual report, as retailers held smaller inventories and a strong New Zealand dollar crimped earnings. Banfield said the company expects to grow earnings between 15 percent and 25 percent this year, and needed to make "a number" of changes to boost long-term profitability, including "thinking like a market leader" and a clear business plan for the future. 

"We were slow to return to investment after the global financial crisis and that did impact our earnings," Banfield said. "We've got a significant number of new products entering the market this year, and those new products will be the catalyst for growth."

Shares in the tap-maker rose 0.9 percent to $1.10 and have declined 23 percent this year, underperforming the NZX Capital Index's 5.4 percent gain. The stock is rated an average of 'buy' according to three analysts surveyed by Reuters, with a median target price of $1.30. 

 

 

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
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 dollar rises as US-China trade, Brexit tensions ease
SkyCity shares hit 7-week low as fire encapsulates convention centre
Wrightson showcases Fruitfed Supplies as horticulture stands out
Fonterra rivals fear dairy giant will get leg up from law overhaul
Wellington Drive remains in the black as it raises operating forecast
OMV plans further maintenance at Pohokura
Sky continues sports drive with extension to netball rights
Apple's asset-shuffling puts $270m value on PowerbyProxi
Fonterra lifts payout forecast on improving global dairy prices
22nd October 2019 Morning Report

IRG See IRG research reports