Methven lifts annual profit 21% as new China plant comes online

Methven [NZX: MVN], the NZX-listed tap and shower manufacturer and exporter, lifted annual profit 21%, in line with guidance, after the acquisition of a Chinese manufacturing plant widened margins.

Profit rose to $5.69 million in the year ended March 31, from $4.71 million a year earlier, the Auckland-based company said in a statement. That was in line with its expectation for annual profit growth of between 15% and 25%. Sales slipped 0.4% to $96.3 million, while earnings before interest, tax, depreciation and amortisation rose 12% to $12.7 million.

At balance date the tap and shower maker's debt increased to $22.75 million from $14.45 million a year earlier, after it finalised the purchase of its Chinese manufacturer, Methven Heshan, formerly Invention Sanitary. At its annual meeting last June, chief executive David Banfield told shareholders that the Chinese acquisition would underpin Methven's profit growth and boost its competitiveness by securing supply and doubling margins. The company said debt levels were "comfortably within its banking covenant limits."

Methven said it was "cautiously optimistic" about the future, and expects full-year profit growth of 15-25% with sales growth of 5% as it benefits from the China acquisition. It will also look to reduce debt. The company said it is changing its balance date to June 30, so it can more readily predict sales and income.

In New Zealand, profit dropped 21% to $3.04 million as sales slipped 1.6% to $32.11 million. Methven said the performance was below expectation as a key customer further reduced its stock holdings in the final quarter.

Across the Tasman, Methven increased profit from Australian operations 23% to $1.59 million, while sales rose 2.9% to $36 million. The company raised prices in Australia to offset the decline in the Australian dollar against the US currency.

The company narrowed its loss in the UK market to $276,000 from a loss of $1.1 million a year earlier, as its sales increased 5.5% to $23.2 million.

Profit in its China market increased 20% to $72,000, while "expected revenue growth has not materialised" and sales slipped 3.5% to $385,000. The company closed its standalone Xiamen office, with back-office functions to be managed from its Methven Heshan operations.

Methven also announced Peter Stanes will end 11 years on the Methven board effective July 15, to be replaced by Norah Barlow, former chief executive of Summerset Holdings. Methven boss Banfield will also join the board as a director. The board declared a dividend of 4c a share.

Shares of Methven rose 1.7% to $1.18 and have gained 2.6% since the start of the year.

(BusinessDesk)