Tenon happy with second half improvement

Wood products company Tenon says it has achieved an "excellent" turnaround in its business during the second half of the year to June.

Tenon today reported an operating profit before interest, tax, depreciation and amortisations (ebitda) of US$20 million ($31.77 million) for the 12 months.

Its second half ebitda of US$14 million for the six months to June was 133 per cent up on the company's first half reported ebitda of US$6m.

Revenue from operations for the 12-month period was US$370m, 34 per cent up from $276m in the prior year. Of the total US$29m came from this country, with the rest from North America.

That result demonstrated the impact of Tenon's more focused presence in North America, the company said.

The increase in revenue was due to growth in US distribution businesses, the inclusion of US company SWM from November, and the launch of Tenon's range of outdoor treated products in the US.

Tenon chief executive Mark Eglinton, said the end of year results reflected an excellent turn around in the business during the second half of the year.

That the second half result was achieved in the environment of a stubbornly strong New Zealand dollar was positive, he said.

During the year Tenon bought for US$17m 51 per cent of SWM -- a Texas-based mouldings, stair parts and millwork manufacturer and pro-dealer distribution business.

Further investment in Tenon's US distribution network was made through the purchase of the remaining one-third equity in Empire for US$29m.

Cost and service initiatives were implemented at 50 per cent owned American Wood Mouldings (AWM), to improve its disappointing first six months result, Mr Eglinton said.

Energy cost savings were also being made following the commissioning in May of a geothermal energy project at Tenon's Taupo site.

During the year Tenon completed the move of its executive office to Maryland in the US.

It also exited its European furniture market development with Zenia House in Denmark. An impairment charge of US$700,000 was made in the first half to provide for all exit costs.

Revenue figures included US$39 million from SWM for the eight months following acquisition, while revenue at Empire was up 27 per cent for the year.

The pricing environment in 2006 was relatively stable for both lumber and moulding products manufactured in Taupo, demonstrating that global supply chains selling to the high value US market were reasonably well balanced.

A dividend payment to shareholders could not be made now, or in the immediate future, with the company needing to meet current and forecast cash needs for its strategic priorities.

But the board reiterated its intention to revisit dividend policy once the company's growth phase was largely complete.

A share buy back of up to 5 per cent of Tenon's issued shares started in April, and as at last Thursday 2.8 million shares had been purchased, representing 4.1 per cent of the company, at an average cost of $3.71.

As a consequence of the buy back major shareholder Rubicon had increased its holding in the company to 57.4 per cent.

The average per share buy back cost had been about 10 per cent above the current Tenon share price, but the board remained of the view that the company's future performance would show the average buy back acquisition cost to be good value for Tenon shareholders.

Overall market activity levels in the US remain ed neutral, Mr Eglinton said.

Some of the higher level of expenditure needed to repair hurricane damage from 2005 would carry forward into 2007 and later years.

Tenon was well-positioned with a far greater exposure to the growing renovation market than the new home construction market.

Tenon shares closed yesterday at $3.36, having traded between $3.02 and $4.50 in the past year.

- NZPA