Renaissance still unprofitable on quakes, Apple competition
By Paul McBeth
Sept. 7 (BusinessDesk) – Renaissance Corp., the primary local distributer of Apple Inc. products, is warning shareholders not to expect a profit until the 2012 financial year as the Christchurch earthquake and new competition in Apple Inc. distribution saps earnings.
The Christchurch-based company expects to make a pre-tax loss of up to $4 million in the 12 months ending Sept. 30, booking a $2.7 million charge on the Christchurch quakes and cutting gross margins by $1.5 million after the new Apple competitor, Ingram Micro New Zealand Holdings, entered the market last year.
Renaissance doesn’t expect to return to profit until the 2012 financial year with forecast net earnings of $1.5 million. It made a pretax loss of $2.6 million last year, when it changed its balance date to September.
The extra competition and natural disasters have forced Renaissance to cut costs, including the laying off of 99 workers since November last year, and has kept it in breach of its banking covenants.
“The trading result for 2011 will not be pretty,” chairman Colin Giffney said in a letter to shareholders. “Significant reductions we have made in employee numbers and operating expenditures will begin to flow in 2012” and will help the company return to profit, he said.
This year’s bottom-line loss might not be as bad as feared if Renaissance’s $2 million of insurance claims are successful, though the level of recovery is uncertain.
In the past 12 months, Renaissance has had to contend with the Canterbury quakes, while iPod and Mac manufacturer Apple Inc. started using a second distributer in New Zealand.
Renaissance is more upbeat about revenue, which is forecast to fall 11% to $185.3 million in the 2011 financial year, while bouncing back to $196.8 million next year.
The shares were unchanged at $1.32 in trading today, and have slumped 52% this year.