29 May 2013
New Zealand-based wood products manufacturer and distributor, Tenon, confirmed today that it expected a significant turnaround in earnings as the US housing recovery gains further momentum.
US building permits in April exceeded 1 million new homes, the highest level recorded since June 2008, signalling a much stronger level of new building activity than the fewer than 500,000 houses built at the cycle low. Over the past 12 months US home prices have, on average, increased 11% (the largest annual gain recorded since April 2006), and the National Association of Realtors predicts further rises of 13% cumulatively in calendars 2013 and 2014. If such further increases were to occur, they would imply an increase of over USD2 trillion in US household wealth, giving further confidence to homeowners to spend on home improvement activities.EBITDA (i.e. earnings before interest, tax, and depreciation) for Tenon's 30 June 2013 fiscal year is now forecast to be in a range of USD4-5 million, assuming existing operating remain for the balance of the year. Operating Profit before Financing Costs (i.e. EBITDA less depreciation) for its fiscal '13 year is forecast to be USD8-9 million better than then USD8 million loss (including restructuring costs) recorded in the previous year.
Luke Moriarty, the company's chairman, said "While this forecast represents a considerable improvement on our last year's 'bottom of the cycle' result, our expectation is that our next fiscal year will be much stronger yet. Assuming the US housing market continues on its recovery path and the NZD:USD cross rate remains around the current range, then we would expect our (June) fiscal '14 EBITDA to be more than twice this year's forecast EBITDA, and our calendar '14 EBITDA to be materially higher than that again."
Tony Johnston, Tenon's chief operating officer, said, "In addition to the benefits that will accrue from the restructuring initiatives we have put in place over the past two years, we have also gained confidence from the continued recovery of the US housing market, which began to take hold during our current fiscal year.
"Revenues from our pro-dealer activities (which now represent approximately 45% of Tenon's total North American revenues, and which supply the new housing market) are up around 25% year-on-year, and we are expecting that our retail activities (i.e. our sales to the large
home improvement centre stores), which have now begun to show positive store comparisons, will lift further in this next fiscal year."
"In addition to the internal growth the company had put in place from new product launches and expanded existing programmes (e.g. the plank panelling, Find It, pine clear boards, hardwood boards, doors and stair parts programmes), Tenon has also achieved market share growth and geographic expansion (e.g. greater volumes ex-Taupo into Europe). Combined, these will have a positive impact on earnings going forward, and our forecasts are now also supported by the emergence of much stronger US housing data."
Source: Tenon media release
Established plantations of pine, macrocarpa and Douglas-fir over 40 hectares now co-exist with carefully positioned ornamental trees on the long and narrow property running 16 kilometres from the highway to the sea.
Often circling the plantations are lusitanicus and cypress that will remain standing when timber trees are harvested.
Another 30 ha of native bush is protected by QE11 covenant and the couple have fenced from stock about 100 ha in gullies for their personal pleasure.
Charles Wiffen said the trees had been planted at the 1400 ha farm as much for providing a pleasant working landscape as for shelter and shade for stock. He said they had made a point of planting oaks, poplars and cypress for variety.
The Wiffens, who also run a Blenheim vineyard and manage the Charles Wiffen label, have been at Inverness for 48 years with Charles' father first running the farm. Elms, maples and "every oak you could think of" now line the property.
Farm Forestry Association award judge Neil Cullen, Balclutha, said the trees were an example of good land use.
Many of the "awkward" corners and gullies had been planted in small tree blocks, shelter belts and ornamental trees to provide shade and shelter appreciated by stock this dry summer, he said.
"I was impressed with the way they have managed the property as far as land use goes. It's a long, stretched out property 16km to the ocean and although there is only 40 ha of tree blocks in 1400 ha a lot of the property isn't suitable for forestry because of access problems."
Wiffen said he was a farmer first and a forester second, but he had always appreciated trees for the qualities they brought to a farm.
Story by Tim Cronshaw, © Fairfax NZ News. To read the full story, click here.