Methven turns on export push

Tap-maker Methven's global ambitions will drain more of its manufacturing from these shores.

Chief executive Rick Fala told shareholders at the company's annual meeting in Auckland yesterday that more outsourcing was needed to boost production of its taps and shower heads in preparation for an "export push" over the next eight years.

"We also have to mitigate the rising costs of core material, including brass, and are scoping other opportunities to gain savings, which includes identifying lower-cost suppliers."

More work would go to its contract manufacturing partners in Italy and China, where half of its components are already made.

That would leave its Auckland plant, employing 209 staff, as the hub for design, testing and higher-end products.

Fala did not expect any redundancies as a result.

Methven's Satinjet technology, in which pairs of fine water jets collide to produce a soft shower, will be the trailblazer for overseas expansion, starting with the US and Europe, followed by Britain and Asia.

"If we are successful the impact on the value of our company will be significant," Fala said.

More immediately, he said, the year ahead was shaping up to be challenging.

Further falls in demand were expected here, although the company was reasonably well placed because of its focus on the still active renovation market.

In Australia, the company expected to improve profitability in premium tap and showerware and to consolidate its No 2 position in valving.

"But it will be tougher going as our competitors appear to be paying us greater attention," Fala said.

The US had the potential to become the company's biggest Satinjet market, and it was moving as quickly as it could to get its sales and marketing programmes set up.

A small net loss was expected in the US this year, but profits were forecast for the second half of next financial year.

In Europe, the focus was on customising Satinjet for French and Italian customers, and looking at opportunities in Britain.

Overall, Fala expected first-half results to be in line with the strong first-half performance last year.

Earnings growth expected in Australia would be offset by costs of setting up in the US.

Profitability would accelerate in the second half because of the reduced cost of producing overseas and sales of new products.

The company was still looking for acquisitions, particularly in the UK.

Methven, which listed in late 2004, was established as an iron and brass foundry in Dunedin 119 years ago.

It has moved away from its manufacturing roots to carve out a path as an innovator of premium showerware, tapware and valving.

Its shares closed at $1.64 yesterday. They have ranged between $1.19 and $1.71 in the past year.