Is there a hint of future financial losses and write-downs for Australia’s building products suppliers in the trading update issued yesterday by New Zealand based glass supplier, Metro Performance Glass?
Metro yesterday told the markets here and in NZ that it had cut its earnings guidance for the period to the end of March because of weak conditions in Australia.
At the same time, the prospects for those conditions continuing saw it write down (or impair) the value of some Australian assets.
It was a development that we might see local companies like CSR (which is selling its Viridian glass business), Boral, James Hardie, and fellow Kiwi company, Fletcher Building revealed later in the year as they come to terms with the slide in residential construction.
But offsetting that for local companies, and Fletcher has been the continuing strength of infrastructure spending (which doesn’t use much glass at all).
In its announcement, yesterday Metro revealed it had reduced group earnings for the full year from $28 million $25 million and will likely make a non-cash impairment of between $7 million and $10 million on the intangible carrying value of its Australian assets.
Full year results for the financial year ending 31 March will be out on 23 May. The news saw the shares fall 7.7% in New Zealand to 47.5 NZ cents.
Metro said its trading in New Zealand had been in line with expectations and profit margins had risen.
But “Australian Glass Group has had a transformative but very disappointing year overall,” CEO Simon Mander said in yesterday’s statement.
“AGG primarily services the new detached housing and alterations and additions market segments in South East Australia, and accordingly are less exposed to the significant declines being seen in multi-residential approvals across Australia.”
“While activity levels are anticipated to soften in AGG’s target markets in 2019-20, AGG is well placed to benefit from a roadmap of legislative changes supporting increased penetration of double glazing in Australia over the medium to long term.”
