Wellington Drive maintains 2018 profit forecast despite Q3 loss

Wellington Drive Technologies widened its loss in the third quarter and downgraded its 2017 earnings guidance. Photo / 123RF

Wellington Drive Technologies, which makes energy efficient motors for commercial refrigerators, widened its loss in the third quarter and downgraded its 2017 earnings guidance on slower customer demand, though it's still forecasting its first net profit for the 2018 financial year.

The Auckland-based company lifted revenue 24 per cent to $7.8 million in the three months to September 30, but the net loss widened to $1.5m from $1m a year earlier.

The company said it had sold more product to its lowest margin customers, there had been delays in a new manufacturing solution, and increased commodity prices which lifted unit costs in the quarter. It also increased staff numbers to 69, up from 61 a year earlier, and increased marketing costs to support new product revenue growth, it said.

Wellington Drive's previous guidance was for 25 per cent to 35 per cent revenue growth for 2017, and earnings before interest, tax, depreciation and amortisation of between $1.5m and $2.1m.

Due to customer demand delays, as much as $1m in revenue has moved from the fourth quarter of 2017 to the first quarter of 2018, and possible future delays mean ebitda will "likely be at the lower end of this guidance and possibly below if the late surge in demand does not eventuate this year," the company said.

Unlock all articles by subscribing to this international offer

All-Access + BusinessDesk Weekly

Herald Premium, Viva Premium, The Listener & BusinessDesk

Pay just

$10

$2

per week

See all offers

Already a subscriber? Sign in here

Or

In 2016, the company made its first ebitda profit of $204,000, compared to an ebitda loss of $1.4m a year earlier.

The company prefers ebitda because it believes the measure avoids distortions. It's forecasting ebitda in 2018 of between $2m and $4m, and a net profit.

"We continue to be satisfied with our top line growth trend in Q3 but margin and profit performance was disappointing for the quarter," chief executive Greg Allen said.

"While we had expected to make a loss in Q3 due to seasonality of demand, it turned out worse than forecast. We do expect a stronger Q4, closer to revenue and margin levels seen earlier in the year, subject to the caveat that those later Q4 orders are reducing our normal revenue visibility.

"The company's provisional FY2018 growth and earnings outlook are underpinned by the expectation of adding further new customers, continuing growth in demand for our new products and lower supply chain costs," Allen said.

The shares last traded at 17 cents, up 4.9 per cent this year.