Metro Performance Glass shares nosedived 28 percent after its first-half profit tumbled 22 percent but chief financial officer John Fraser-Mackenzie says the move is overdone.
The extent of the drop is surprising, in particular given the New Zealand result, Fraser-Mackenzie told BusinessDesk. The stock last traded at 38 cents after touching a record low of 37 cents.
“We have produced a better result for New Zealand. We do believe that our fundamentals are looking good. Our customer service is better, our quality is better, our people retention is better. We have had good cash flow, all from New Zealand. We are very encouraged with our New Zealand result and we think the business is well placed.”
The weaker result and the profit warning was largely due to poor trading results in Australia. Fraser-Mackenzie said, however, “we see it as a moment in time.”
New Zealand’s biggest glass processor earlier said half-year net profit for the six months to Sept. 30 was $9.1 million versus $11.8 million a year earlier. It also lowered its full-year guidance and said it won’t be paying any dividends.
While New Zealand first-half revenue rose 1 percent to $113 million on elevated residential and non-residential construction, in Australia it fell 7.1 percent. The business there posted a $1.3 million loss before interest and tax, compared with earnings of $2.6 million a year earlier.
While the results have been disappointing “we are not too worried about what the business can do,” Fraser-Mackenzie said.
“We’ve got good machinery, we’ve got good people and the market is good. We will work our way through it and the business will bounce back just fine,” he said.
Nor is the company currently looking at selling the Australian Glass Group. “As with any industry, if there were structural changes or if we lose faith in our ability to get the business back up and running, then we’d look at it. But, at this point it’s not on our agenda,” he said.
Earlier he told analysts that he expects the second half result in Australia to be better than the earnings before interest and taxation loss it reported in the first half. “We are expecting a slight recovery in the second half,” he said. He isn’t expecting profitable growth until the 2020 financial year.
The share price had already taken a nose-dive this month when Metroglass said Architectural Profiles, or APL, had announced its intention to enter the New Zealand glass processing market through a new plant near Hamilton which is expected to gradually come on stream from mid-2020.
Fraser-Mackenzie said that APL is not a Metroglass customer but the two companies share customers where APL provides the aluminum and Metroglass provides glass. He said the amount of revenue the company has in shared customers in the residential window space is about $50 million.
While that amount is potentially at risk, he was relatively sanguine about the potential impact.
“We think they are a very capable company, certainly in aluminium and in the windows, but glass is a difficult game,” he said. “It won’t be easy for them to develop the IP and get it up and running.”
In that context, Metroglass is “really focused on being absolutely the best in the industry and using the 30 years of experience in IP that we have in glass and really absolutely the best,” he said.