MetroGlass expects miss on first-half profit

Metro Performance Glass [NZX: MPG] expects first-half profit to be below its prospectus forecast as capacity constraints in New Zealand's construction industry weighs on the country's largest glass processor.

Profit will be between $10 million and $11 million in the six months ending September 30.

This is below its July 2014 prospectus forecast for profit of $12.1 million, chairman John Goulter told shareholders at its first annual meeting since floating on the NZX last July.

Sales will be in line with its prospectus forecast of $94.1 million.

The company says 2016 annual profit will be between $20 million and $22 million in the year ending March 31, on sales of $190 million.

In May, MetroGlass reported profit of $9.6 million in the eight months ended March, on $115 million in sales. This was after acquiring MetroGlass Holdings before its IPO last year.

New Zealand building consents are at record highs, pushed up by a shortage of houses in Auckland and the Christchurch rebuild.

Actual work is underpinned by residential construction, but MetroGlass, which has more than half of New Zealand's glass processing market, sees capacity constraints in the building industry as keeping a lid on sales.

"Industry capacity constraints have led us to believe the current building cycle will last longer but have a lower peak than was anticipated last year at the time of IPO," Mr Goulter says.

"This changed landscape and its associated delays to both residential and commercial projects are having an impact on our short-term financial performance. That notwithstanding, we are cautiously optimistic."

The company will focus on customer service to keep market share and lift growth, while also investing in building capacity.

Mr Goulter says he can understand that investors are "disappointed with the recent performance of our share price", with the stock having dropped as low as $1.30 earlier this week, below the $1.70 offer price last July when it raised $244.2 million. The stock reached a high of $2.03 in October, and rose 0.8% to $1.35 in trading today.

Of the money raised last year, some $230.5 million was used to buy the Metroglass assets from private equity owners Crescent Capital and Anchorage Capital and senior management. The private equity owners have kept a combined stake of 18.5%, with management retaining 3.8%.

About $10.9 million covered the cost of the offer and $2.8 million went towards reducing debt.

(BusinessDesk)