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Tenon returns to profit on US building activity

Tenon returns to profit on US building activity, will use surplus cash for share buyback

By Suze Metherell

Aug. 21 (BusinessDesk) - Tenon, the wood mouldings manufacturer, returned to profit as increased building activity in its main US market boosted sales and said it plans to return cash to investors through an on-market share buyback scheme.

Profit was US$2 million in the year ended June 30, turning around a loss of US$3 million a year earlier, the Taupo-based company said in a statement. Sales rose 8.8 percent to US$396 million, while earnings before interest, taxation, depreciation and amortisation rose 120 percent to US$11 million.

Tenon’s trading performance is closely tied to demand in America’s housing market, where close to 90 percent of its revenue comes from. US building is emerging from the devastation wreaked by the sub-prime mortgage debacle with US housing. Home Depot, one of Tenon's major channels into the US and that country's largest home improvement store, reported a 14 percent gain in second quarter profit to $2.05 billion, leading it to boost its annual forecast.

"We enjoyed revenue increases in both of our core US customer segments - the pro-dealer market (the new home construction market) and the DIY/retail segment," Tenon chairman Luke Moriarty. "Tenon is no well past the 'break-even' US macro-conditions that prevailed over the past five to six years, and as volumes increase from hereon they should be translated directly into further improved earnings performance."

Tenon shares have more than doubled over the past two years, having dropped as low as 50 cents during the sub-prime mortgage crisis and subsequent global financial crisis, but the company believes they remain undervalued, and will embark on an on-market share buyback scheme next Wednesday for 400,000 shares and flagged similar buybacks in the future. It has previously signalled a possible dual-listing, but didn't provide any more details today.

Shares of Tenon were unchanged at $1.56 and have gained 7.6 percent this year.

In July the company expanded across the Tasman to supply Woolworths and Lowe's Home Improvement joint venture Masters Home Improvement stores as it plans to replicate its US model where it supplies both professional construction and the do-it-yourself market.

In the year the company signed a new five-year US$70 million financing facility to expire late 2018, replacing its existing US$52 million facility.


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