KEY POINTS:
A sharp decline in US building activity and the impact of the high New Zealand dollar have shaved Tenon's full year profit but analysts say the listed forestry products company has weathered those headwinds.
The forest owner-turned-specialist wood products maker said its business - much of which is conducted in the US - had suffered after a marked slowing in US sales of new and existing homes had negatively affected the refurbishment sector.
"It would be fair to say that the extent of the slowdown we have seen in the remodelling segment of the market had not been anticipated by any market participant - with the softness in Florida and the Mid-West, in particular, having been a material drag on our earnings over the past 12 months," chief executive Mark Eglinton said.
The company reported a full year net profit of to US$5 million ($7 million), down from US$8 million the year before.
Operating revenue was up 6.5 per cent to US$394 million while earnings before interest, tax, depreciation and amortisation (ebitda) were stable at US$20 million.
Forsyth Barr analyst John Cairns praised the ebitda result, given the difficulties facing the US new housing and refurbishment markets and impact of the New Zealand dollar. "It's a creditable result for very difficult trading conditions."
The company said the appreciation of the New Zealand dollar over the period impacted upon its Taupo operations, although this was partly offset by a 30 per cent rise in the US dollar price of a lumber class that Tenon considers to be a key pricing index.
The company expected the new housing and remodelling markets in which it operates to continue to feel the impact of the sub-prime mortgage collapse in its 2008 financial year but to a lesser degree.
However, it predicted market conditions should improve in the coming year, and that beyond that a broad industry recovery was likely. Tenon shares closed unchanged at $2.05.
The results follow Tenon's successful refinancing of a five-year, US$100 million debt facility despite turbulent financial markets, plus its announcement it had upped its ownership of SouthWest Mouldings from 51 per cent to 75.5 per cent in a deal worth $7.8 million.
During the year Tenon bailed out of its loss-making 50 per cent stake in American Wood Mouldings, and acquired Ornamental Mouldings, a manufacturer and distributor of decorative mouldings.
TENON
Year to June 30
Revenue
2007 - US$394m
2006 - US$370m
Net profit
2007 - US$5m
2006 - US$8m
