Tough first half for Tenon; hopes for US housing uptick

Feb. 17 (BusinessDesk) – Wood-mouldings maker Tenon sank to a US$6 million first-half net loss, with one-off restructuring costs, a strong kiwi dollar and weak US housing starts to blame.

With its manufacturing plant in Taupo using New Zealand wood, Tenon supplies readymade timber products to the US residential market, and yesterday announced its first push into Australia, where it has bought the second-largest player in that market, Whiteline Timber Products.

The loss for the six months ended Dec. 31 was announced after trading closed on the NZX. Tenon’s share price jumped 6.7 percent to 80 cents today.

Sales revenue of $162 million were the same as in the same period last year, “despite the more difficult market conditions that prevailed,” said chairman Luke Moriarty in a statement to the NZX.

The kiwi dollar fluctuated within a 14 cent range against the US dollar during the period, and analysis of the operating earnings result blamed the sluggish performance equally on the New Zealand dollar gyrations and the impact of ongoing “languid” conditions in the US housing market.

Some US$2 million in one-off costs were booked to cover US wholesale and vendor network reorganisation, closure of its Maryland office, and the establishment of a new distribution programme for a new product to the US DIY chain, Lowes.

A $5 million programme of efficiency improvements was also undertaken at the Taupo manufacturing site. These initiatives would “generate benefits in future periods beyond costs recorded in the current period.”

The company is setting considerable store by its hopes for a new decking product, known as “Perennial Wood”, which will roll out in New England over the American summer.

The Australian purchase was “just one example of the new business growth initiatives that are under way,” Tenon said. “We would expect more positive announcements of this type to be made as the year progresses.”

The company’s debt level of US$36 million at Dec. 31 was consistent with the stated target of “mid-30’s”, the statement said.

While moves made to date should improve earnings when market conditions improved, the ongoing strength of the New Zealand dollar against the greenback and an “as is” housing market in the US for the next months at least, were likely to offset any gains.

Historic low interest rates, house affordability and home starts in the US all pointed to a recovery, as did a US$17 billion federal mortgage write-down programme.

“While we will need to see how wider economic events and key housing data track over the next six months before a new ‘direction’ can be called with certainty, these are certainly positive early signs of a recovery emerging,” the company said.

(BusinessDesk)

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