Methven annual profit drops 8.6% on strong currency, inventory woes
Methven [NZX: MVN] reported an 8.6 percent fall in full-year profit as the tap maker and distributor struggles with retailers holding smaller inventories, and as the strength of the New Zealand dollar erodes exported earnings.
Net profit fell to $4.7 million in the year ended March 31 from $5.2 million a year earlier, the Auckland-based company said in a statement. Revenue fell 1.7 percent to $96.7 million.
Sales to Australian customers grew 5.8 percent to A$35 million, though that didn't translate to higher profits with Methven's margins squeezed by competitive pricing, the strength of the kiwi currency and increases in supply chain costs. Australian stock reduction programmes from retailers in the market continued longer-than-expected, causing it to cut full-year earnings guidance twice this year. High Australian stock levels led to a 48 percent increase in Methven's debt to $17.2 million in 2013.
The company has since reduced its debt 16 percent to $14.5 million but that's forecast to rise with the purchase of its Chinese production partner, Invention Sanitary mid this year. Methven will pay four times the manufacturer's profit for the 12 months ended June 30, 2014, up to a maximum of $8 million. The Chinese acquisition is expected to add an annual $2 million to net profit after tax from September.
New Zealand sales rose to $35.1 million from $34.9 million the previous year, slightly below its own expectations, the company said. UK earnings before interest, tax, depreciation and amortisation was $1.1 million, up from a break-even position as revenue showed "slight growth".
Methven's board declared a final dividend of 4.5 cents per share payable June 30.
Shares in the NZX listed tap maker fell 0.8 percent to $1.18 and have declined 3.3 percent in the past year.