Methven Moderates Outlook, Progresses US Entry

Announcement 2 March 2006

Methven Moderates Full Year Outlook but Progresses U.S. Market Entry

Lower than expected second half sales and tough trading conditions in the Australian valve market have impacted Methven’s anticipated turnover growth and profit outlook for the year to 31 March.

“At this stage we’re looking at the company’s 31 March year end profit position being on par with, or marginally behind, last year when we had been cautiously targeting a continued lift in revenue and profitability after a strong first half result,” said Methven CEO, Rick Fala.

He said Australian sales of shower and tapware ranges have continued to grow strongly and despite some softening in margins, it was pleasing to see Methven Australia again profitable which justified the investment in branding and expanding the sales team.

Mr Fala said the specialist, hot water valve category for Methven and its Australian valving distributor had come under pressure from competitive pricing, resulting in a significant drop in sales compared with the same period last year.

“We are fighting to defend our position in this high priority market,” he said. “But, we are confident that our Australian platform is solid and product mix right to regain market share in valving and maintain our sales growth momentum in tap and showerware to achieve the returns we seek into the future.”

New Zealand sales have held up reasonably well. Second half sales are expected to be close to the relatively strong sales levels achieved in the corresponding period last year, but will be below first half sales this year.

“Expected full year sales for New Zealand are marginally ahead of the prior year, reflecting some softening in the market, although the key renovation sector remains more stable,” Mr Fala said.

The proprietary, new generation SatinJet shower range continued to be a top seller for Methven and new products to appeal to the design conscious consumer were being rolled out on schedule.
“We’re bringing forward our American push and have established a U.S. based subsidiary with a small office in New York,” Mr Fala said. “And we now have agency distribution agreements in place covering five territories from Chicago to the east coast with shipments to begin early in our new financial year.”

The initial focus will be on supplying high end boutique plumbing stores with a range of SatinJet shower products.

Stuart Gray, currently the New Zealand National Sales and Marketing Manager, will relocate to New York in March to manage the American marketing and distribution thrust. John Doherty will assume responsibility for New Zealand sales and marketing.

Methven, New Zealand’s leading designer, manufacturer and marketer of exclusive showerware, tapware and valving, delivered a solid interim result with Group turnover up 7.1% to $29.8 million Group and net profit after tax up 7.7% to $3.5 million for the six months to 30 September 2005.

The company posted a 31 March 2005 year end net profit after tax (before minority interests) of $6.5 million, 5 per cent ahead of its prospectus forecasts and 30 per cent up on 2003-04.

The company will report the 31 March 2006 full year result in May.

ENDS

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