Supply chain problems are making their presence felt on NZX-listed Metro Performance Glass.
The company, which today reported a 2 per cent fall in first half net to $7.6m, said
it was experiencing significant disruptions and delays in international shipping, resulting from a surge in sea freight demand and backlogs at key ports.
All flat glass used in New Zealand is imported.
Metroglass chief executive Simon Mander said the company was monitoring the supply situation closely and was increasing its levels of "safety" stock.
"However, we are anticipating an increase in shipping related costs in the second half of the financial year," Mander said.
"The challenge that we have got right at the moment is that there is a lot of disruption in international shipping."
Mander said the key factors behind the company's first half profit were the five-week Covid-19 shutdown and a subsequent ramp-up, accompanied by $6.1m in Government wage subsidy.
Group revenue came to $117m in the six months to September 30, down 14 per cent, and EBIT fell by 12 per cent to $12.8m.
Mander said there had been an encouraging turnaround in the Australia, despite extensive lockdowns in Victoria, where much of its business is concentrated.
In New Zealand, building consents were strong.
"While there is a lot of good news, there is also that uncertainty," Mander said.
"At the moment we are feeling okay about inventory, but that could change."
Metroglass said there was a solid rebound in trading in New Zealand from June to September, with the financial impacts from the shutdown being partially offset by the wage subsidy.
The company retained staff during the Covid-19 lockdown, and hired more people, 80 of whom are apprentices.
New Zealand revenue fell by 19 per cent to $89.2m as a result of the shutdown period, with daily sales from June to September only 3 per cent lower than the same months last year. Australian revenue rose by 3 per cent to $27.8m.
Building consents had been stronger than had anticipated in recent months.
"However, there is some risk that building activity may begin to soften early next year as a result of broader macro-economic economic factors as well as local issues such as extended border restrictions and further weakness in business confidence and labour markets," Mander said.
Metroglass suffered a net loss of $77.9m in the March 31 year, driven by asset impairments arising from the Covid-19 pandemic.
The company said last year said it would not pay dividends while it paid down debt.
In today's result, the company said its net bank debt declined by $25.7m, year on year to $47.7m, supported by a one‐off cash benefit from the sale and leaseback of two thirds of its vehicle fleet, a $4.6m reduction of working capital, and a 49 per cent fall in capital expenditure. Over the past six months net debt reduced by $19.2m.
Mander said Metroglass's net debt to Ebitda ratio was 1.53 times for the half year.
The company has said it would look at repaying dividends once the ratio fell to 1.5 on a sustainable basis.
Shares in Metroglass last traded at 40c, down 3.5c from Friday's close.