Eco Investor June 2017

Core Securities

Australia Contributes to Metro Glass Profit

Australian Glass Group, which New Zealand's Metro Performance Glass acquired last September, has contributed to Metro Glass' strong revenue growth and net profit.

For the year to 31 March, Metro Glass' revenue grew by 30 per cent to NS$244.3 million, while its New Zealand based revenue grew 14 per cent to NZ$213.8 million.

Net profit fell from NZ$20.5 million to $19.4 million. But normalized profit - after taking out the acquisition costs for Australian Glass Group and tax adjustments for IPO expenses - rose 11 per cent to NZ$21.3 million.

The company will pay a fully imputed final dividend of NZ 4 cents per share, plus a supplementary dividend of NZ 0.7059 cents.

Importantly for environmental investors, revenue from double glazed windows and Low E (emissivity) glass, which also has insulation properties, is rising.

Before New Zealand's Building Code changes in 2007, over 90 per cent of Metro Glass' window manufacturing was single panes of glass while doubleglazed units were less than 10 per cent. Today, double-glazed units generate over half of the company's revenue and are more than 80 per cent of all window glass it processes.

Revenue from the RetroFit double glazing business grew 23 per cent to NZ$17.2 million.

Low E glass is now used in 20 per cent of all double-glazed window units the company produces.

The Rise of Double Glazing in New Zealand.

Chief executive Nigel Rigby said Australia is also a double glazing opportunity. "In the short to medium term we see double glazing penetration gathering considerable momentum in cooler climates like Victoria. This trend is being hastened by building code changes, mirroring the New Zealand experience following code changes in 2007," he said.

The double glazing market in Australia is mainly in Victoria, the coastal and Great Dividing Range areas of NSW, in Tasmania, south east SA, and south west WA. About 14 million people live there. Metro Glass says penetration of double glazing in new buildings in these markets is between 30 and 50 per cent, well short of the over 90 per cent in New Zealand.

Through Australian Glass Group, Metro Glass wants to leverage its glass procurement and manufacturing expertise and its distribution capabilities in the Australian market and reinforce its leadership of the Australasian glass processing industry.

Mr Rigby said Metro Glass is delivering a broad range of high performance glass products at a cost that is competitive with both domestic and international manufacturers.

To handle the increased volume of glass, the company needs to further automate and cut costs. It is assessing the investment required and anticipates its capital expenditure will increase in 2017-18. The company is also assessing Australian Glass Group's short to medium term capital requirements.

On outlook, chairman Sir John Goulter said the markets in New Zealand are supportive. "Low interest rates, strong net migration, a robust economy and the persistent housing shortage in the upper North Island, are fueling one of the larger surges in residential and commercial construction activity the country has seen."

The growth opportunities in Australia will also underpin an improved results in the 2017-18, he said. (ASX: MPP)







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