Glass firm $50m in red

Growth in double glazing has helped the company survive. Photo / Dean Purcell

New Zealand's leading glass supplier is confident the building industry is slowly picking up, after an horrific year which saw the company plunge nearly $50 million into the red.

According to accounts filed with the Companies Office, Metro GlassTech's revenue fell from around $156 million to around $137 million in the year to March, leading to a breach of its banking covenants and forcing it to renegotiate its debt facilities.

Since it was bought by Australian private equity firm Catalyst four years ago, the company has accumulated losses of more than $88 million.

Chairman Kim Ellis insisted yesterday the company was seeing some improvement in sales, although mostly outside Auckland and mostly in residential housing.

"We're disappointed, as the entire construction industry is, that the upturn hasn't happened sooner rather than later."

The company, formerly known as Metropolitan Glass, was bought by Catalyst for $366 million in 2006 - prompting the then chairman of Fletcher Building, Ralph Waters, to predict some "train smashes" as a result of the private equity boom.

At the time the Australians dismissed his comments as sour grapes - Fletcher had been outbid by nearly $100 million.

However, the investment has so far been disastrous for Catalyst, and for Australian investment bank Macquarie, which also has a stake in the company.

Over the past three years, Metro GlassTech's pre-tax losses have ballooned from $7.1 million, to $38.8 million, to $49.3 million, and during the year it wrote off $30.8 million worth of goodwill for its operations in the Auckland region.

Its accounts show some of the interest it owes banks is being added to its loans.

At the end of March, the company had net debt of $262 million, down slightly on the previous year's net debt of $266 million.

It was forced to renegotiate its arrangements in October after breaching two of its banking covenants.

During the year, more than $100 million of preference shares were converted to ordinary shares, and shareholders were asked to stump up for another $15 million worth of preference shares to keep its bankers happy.

Of the $131 million pumped into its subsidiaries during the year, the company earmarked $56.7 million as being risky - up significantly on $13.3 million the previous year.

However, its auditors have not expressed any concern about the company's ability to remain solvent and Ellis said yesterday he was confident the worst was now behind it. After laying off around 100 staff last year, the company was now rehiring.

While building consents had increased from a low of around 12,000 a year to around 18,000, they were still below a sustainable figure of around 25,000, and below their peak of about 30,000.

However, the increasing trend towards double glazing had helped it survive.

"There's a modest recovery happening. Unfortunately it's not a hockey stick, but it's a steady improvement, particularly outside Auckland. And I think Christchurch is going to get a bit of a fillip, for obvious reasons."

None of the company's founders remains on its board. Aucklander Andrew Smith resigned in June 2008 and Aucklander Cameron Gregory resigned last November.