No sign of the Reserve Bank’s slowdown having an impact on the results of Crane group, the building products group.
The company yesterday reaffirmed previous guidance of a 15% to 20% rise in full year net after tax profit with a forecast rise of "around 18%" and revealed a big contract to deliver pipes to a Victorian Government water project, but also said its plumbing and electrical products distribution businesses in Australia and New Zealand would be revamped.
That will cost 90 jobs and around $3 million.
The shares shed 33c to $13.06, after hitting a low of $12.98. Investors were concerned at the message the revamp of the two businesses and job losses was sending.
"A strong second half trading performance in Australia has offset weaker than expected trading conditions in New Zealand. Management expects FY08 earnings (net profit after tax but before significant items) to be around 18 per cent higher than FY07, in line with our previous earnings guidance," Crane said in a trading update to the ASX yesterday.
Normalised annual profit in fiscal 2007 was $54 million.
In the December half of the 2008 year the company reported net profit after tax before significant items of $35.7 million, up 13.4%, a fully franked interim dividend of 35c per share, up 9.4% on last year; and the guidance that net profit after tax before significant items for the full year was expected to be up approximately 15% to 20% on last year.
With the Reserve Bank engineering a slowdown in the domestic economy, especially the building and construction sectors, the Crane guidance is a bit of a surprise when the likes of Boral have already warned of a downturn.
But the resources industry and infrastructure projects like the Victorian water pipeline are obviously offsetting the slowdown.
Hence the need for the restructure, especially with the NZ business hurting as the building and construction sectors over there have seen a sharp fall in activity in recent months.
It also announced a restructure of its plumbing and electrical distribution business in Australia and New Zealand.
The two divisions, Tradelink and CDNZ, will be merged and called Trade Distribution.
"The two divisions, which previously operated independently, will now be combined into one business unit called Trade Distribution headed up by Ivor Timmins. Mr Timmins has been Executive General Manager of Tradelink for the past four years," Crane said in the ASX statement..
"As a consequence of this restructure Karl Smith, who was Executive General Manager of CDNZ, has left the organisation.
"Cost reduction programs currently underway within the combined business will see approximately 90 managerial and support roles made redundant by the end of June, 2008."
Crane said it expects to incur a one-off significant charge of approximately $3 million after tax in FY08 in respect of these restructuring costs.
Crane also provided details of the Victorian water pipe contract win.
Mitchell Water Australia has been awarded the contract to construct Supply Systems 3 and 4 of the project. The pipe and fittings for this project will be sourced from Crane Group’s Pipelines division during the next 17 months.
The Wimmera Mallee Pipeline Project is one of the most significant water resource management projects in Australia.
The $501 million project involves the construction of almost 9,000 kilometres of reticulated pipeline to replace over 16,000 kilometres of existing, highly inefficient open channels.
The project will supply stock and domestic water to approximately 6,000 rural customers and 36 towns across a region that covers 10% of the total land area of Victoria, from the Grampians to the Murray River.
Crane Group Managing Director Greg Sedgwick said the contract wins demonstrated Crane Group’s expertise in the growing business of securing and protecting water flows.
