Mercer Group looks to sell two divisions and forecasts 2015 loss

Expecting a loss in 2015, the stainless steel fabricator Mercer Group [NZX: MGL] is considering selling its interiors and medical divisions to focus on its core business.

The Auckland-based company expects to post a $7.8 million loss before finance costs and tax for the year ended June 30, compared to a $100,000 profit in 2014, it says. Audited financial statements will be released later this month.

The result will include a $6 million write-down of assets in its interiors, medical divisions and intangible asset impairments.

Mercer will provide a more detailed breakdown on release of its audited results, including the breakeven point for underlying earnings before interest, tax, depreciation and amortisation from those parts of the business it now considers core.

Following a review by a new executive team, the company plans to focus on further developing its export-led food processing technology business, which includes Titan Slicers, commercialising its patent protected S-Clave sterilisation technology and growing its stainless steel fabrication business.

Stainless steel fabrication is expected to post record Ebitda of $2.1 million, after it successfully diversified away from its reliance on the dairy industry.

But the Titan Slicer division has performed below expectations in the past two years as a result of operational issues and is now projected to lose $1.2 million at the Ebitda level this financial year.

Prospects for the development of Mercer Group's disruptive S-Clave technology remain strong, with the support of continued government research and development funding.

Rodger Shepherd, the former chief executive who resigned in April, has now also resigned as a director. He's been replaced by Mercer director Richard Rookes who remains a manager of the Rakaia Fund, a material shareholder in the company. Tobin Blathwayt, who resigned as chief financial officer in April, has remained with the company as chief operating officer.

Both Shepherd and Blathwayt were hired in 2011 after a strategic review. Mercer had suffered a series of setbacks, including being caught with too much debt on its books, and halted repayments to failed finance company South Canterbury Finance after breaching banking covenants.

Under Shepherd's leadership the company turnaround included investing in intellectual property, branching out into the US market, and acquiring the Titan slicers business in 2012.

The shares last traded at 10c and have lost half their value so far this year.

(BusinessDesk)

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