MetroGlass first-half profit meets reduced guidance as capacity constraints squeeze earnings

See also: Metro Glass aims to navigate lumpy nature of construction

Metro Performance Glass [NZX: MPG], the country's biggest glass processor, reported first-half earnings in line with its reduced guidance as capacity constraints in the construction sector squeezed its margins, even as sales came in better than expected.

Net profit was $11 million, or 5.9c per share, in the six months ended September 30, the top end of the $10-11 million range projected at its August annual meeting when it said it would miss the $12.1 million forecast in its prospectus last year. That was on sales of $94.9 million, beating the $94.1 million forecast.

The cost of goods sold was $46.5 million in the half, more than the $44 million forecast when MetroGlass listed last year, while distribution and glazing-related expenses of $17.3 million were higher than the $16.4 million expected.

In August, the Auckland-based company warned earnings would be lower than forecast due to capacity constraints in the building sector, which would extend the length of time for the current cycle, but lower the peak.

Today, it said earnings lagged behind sales growth because of MetroGlass's decision to maintain higher operational costs to keep market share through strong customer service, prepare for its biggest ever forward book orders, and develop infrastructure for its expanding double glazing business.

"Construction markets are benefiting from record net migration, low interest rates and rising momentum in building activity, particularly in Auckland and the non-residential build in Canterbury," chief executive Nigel Rigby said. "Metro Performance Glass is well placed to benefit from these trends."

The company affirmed annual earnings guidance for net profit to be between $20 million and $22 million on sales of $190 million in the year ending March 31, 2016.

The board declared an interim dividend of 3.6c per share, payable on January 22.

The shares last traded at $1.50 and have dropped 21% this year.

The company listed in July last year, raising $230.5 million at $1.70 apiece to buy MetroGlass's assets from its private equity owners Crescent Capital and Anchorage Capital, and senior management. The private equity firms kept an 18.5% stake and management retained 3.8%.

Crescent and Anchorage took control of MetroGlass in 2012 after its previous owner couldn't manage the debt burden of the company.

(BusinessDesk)