Metroglass sees softer building activity continuing into next year

Building activity is expected to remain softer for the next four months at least and may fall further into next year due to economic headwinds, says the country’s leading glass manufacturer.

Metro Performance Glass chief executive Simon Mander told the company’s annual meeting the economic issue may “accelerate a further activity decline” at the end of this year and into 2024.

The company, which rejected a takeover bid last month, continued to refine its plans to improve the profitability of the New Zealand business, he said.

Shareholders, however, weren’t impressed, voting one director off the board and voicing their frustration at the company’s poor performance.

Chair Peter Griffiths said several non-binding offers for the Australian business were expected to conclude their due diligence shortly. The sale process started in February.

If the board accepts any final offers, its aim was to significantly reduce debt, which increased to $60.1 million in the 2023 financial year, mainly due to a higher volume of inventory, which was also at higher unit cost.

Griffiths said the board continued to focus on its aim of reducing the group’s debt leverage to below 1.5 times net debt to Ebitda. Good progress had been made but the pandemic had negatively affected earnings and margins. It was the board’s intention to return to dividends as free cash flow became available in line with the company’s capital management framework.

Group net debt was expected to be in the range of $53m to $55m in the first six months of FY24, Mander said.

Group earnings before interest and tax for this period were expected to be better than FY23′s performance.

The New Zealand business performance was expected to improve in the first half of FY24 with less disruption to the international supply chain and increasing demand for high thermal insulation performance Low E glass, introduced from November 2022 under the new building code.

The Australian business had a “much improved result after a number of very difficult years”, Mander said, with revenue lifting 32 per cent and an ebit result of A$6.4m ($6.9m).

In Australia, the number of detached dwelling starts continued to decline in all states, Mander said.

However, increasing use of double-glazing in homes was likely to partially offset the fall in overall house building.

First quarter revenue was similar to the same period in FY23. New Zealand revenue was 9 per cent down but improving pricing and mix was helping to offset the volume reductions from a softer market.

The Australian business continued to gain momentum in the first quarter of FY24 with glass processed, revenue, gross profit and ebit above the same period last financial year.

Last month the Metroglass board spurned a potential takeover bid for the company from two of its major shareholders.

Vulcan Steel founder Peter Wells and veteran investor Peter Masfen, who collectively owned 25.1 per cent of Metroglass, joined forces to acquire all or a substantial part of the company through a scheme of arrangement.

The offer was 18 cents a share with conditions.

The company’s NZX share price has since been steady at 18c per share.

Director Graham Stuart – up for re-election – was voted off the board as shareholders voiced their frustration at the company’s performance over the last few years.

He told BusinessDesk that a director never walked into re-election confident they’d be re-elected, describing it as an occupational hazard that came with the role.