Methven expects 15-20pc fall in annual profits

Methven chief executive Rick Fala. File photo/Brett Phibbs.

Methven is forecasting a fall in net profit of 15 to 20 per cent in 2009/10 as trading conditions in Britain worsen.

But the bathroomware designer and marketer said it also expected a 20 per cent fall in net debt for the year and continued strong cash flows from healthy Australasian sales and working capital reductions.

Its shares have plunged 7 per cent on the news, falling 10 cents to $1.32.

Dividends were expected to be kept at current levels, Methven said.

For the year to the end of March, Methven reported a 3.1 per cent rise in net profit to $10.1 million.

At today's annual meeting in Auckland, chairman Phil Lough said 2009/10 would be hard going, although Methven's core renovation and replacement market appeared less depressed than other segments.

The company was implementing strict cost containment measures, seeking operating efficiencies and freezing salaries and director fees, Mr Lough said.

But Methven was not pruning back on growth activities in areas where it believed it could lift long-term profitability and market presence.

Group chief executive Rick Fala said the company's plan was to expand its reach into new markets, niches and channels including beauty and wellbeing and the hotel room retrofit segment.

In Britain the outlook was for a deep recession, resulting in a significant decline in margins and profitability.

New Zealand was trading well in the conditions, with the outlook for 2009/10 being a reduction in sales and profitability for the full year.

In Australia, the outlook for the year was for a strong improvement in sales and profitability based on targeting the tapware market - where Methven had a low market share - and the valving sector, said Fala.

Methven had pulled out of the fledgling United States market to focus on its core markets, but was providing market support from New Zealand and seeking distributorships.

US losses were expected to reduce from last year's $900,000 to closer to break even at the end of the current financial year.

In the first half, profits were expected to be down between 20 and 25 per cent on the same period last year, while first half net debt was expected to be down 30 per cent.


- NZPA