Tenon back to paying dividend

Tenon derives 90 per cent of its revenue from the United States.

Annual profit triples to US$6m on lower NZ dollar and recovery of US housing market.

Tenon, whose locally produced wood mouldings are sold in the United States, announced its first dividend in 17 years after it trebled annual profit as a rebound in the US housing market and a decline in the Kiwi dollar against the greenback boosted earnings.

The Taupo firm will pay a 5c-a-share final dividend on November 6, the first dividend since April 1998. Tenon flagged in February it would return to paying dividends in 2016, but yesterday's announcement said the board would start the payments immediately and intended to make two a year.

Profit rose to US$6 million in the year ended June 30, from US$2 million a year earlier, the company said. Sales rose 2.5 per cent to US$406 million. Earnings before interest, tax, depreciation and amortisation (ebitda) rose 18 per cent to US$13 million. The company expects 2016 ebitda, excluding foreign exchange gains or losses, to exceed US$20 million.

After a decade of losses, Tenon last year returned to profitability as the US housing market, where it gets 90 per cent of revenue, began to recover after being hit by the sub-prime mortgage crisis and subsequent global financial crisis.

In the 2015 year, the rebound in the US housing market, where a builder's confidence index is at a nine-year high and new home permits are at an eight-year high, and the depreciation in the New Zealand dollar against the greenback boosted Tenon's income.

"Tenon is leveraged to recovery in both the new home construction (ie, pro-dealer) and do-it-yourself (ie, retail) markets in the US," said chairman Luke Moriarty.

"These markets share some common drivers - job security and job growth, real wage growth, credit availability, home prices, affordability, homes available for sale, and existing house sales levels, are all key to both markets.

"Almost all of these drivers are now supportive of a continued recovery in new home construction and in improved retail activity."

Looking ahead, the company saw the broader risk that the US Federal Reserve might move to lift interest rates, but expected recovery in the housing market to continue. The continuation of a more favourable exchange rate, the benefit of restructuring its North American unit, and the completion of Taupo manufacturing plant upgrades with refurbished store costs behind it should see a boost to earnings.

At balance date, debt had risen to US$58 million, from US$50 million a year earlier.

Shares closed up up 17.5 per cent at $2.35, having dropped as low as 50c during the GFC.

Tenon

• US$406 million sales, up 2.5%.

• US$6 million profit, up from US$2 million.

• 5c a share final dividend.