Metro Performance Glass shares fell more than 10 per cent after the company issued a full-year profit warning and another weak half-year result amid variable construction activity and heightened competition.
The glass manufacturer downgraded its full-year earnings before interest and tax by up to 22 per cent, although that will still be above the previous year's result.
Metroglass reported a $7.7 million profit for the six months ended September compared with $9.1 million for the same six months last year.
Group revenue fell 3 per cent to $136.7 million while ebit was down 6 per cent at $14.5 million to which the Australian operations contributed a $2.3 million loss.
"This was principally due to variable customer demand levels and increased competition in the upper North Island of New Zealand and Victoria, Australia," the company says in a statement.
It is forecasting full-year ebit will now be $21-24 million, down from the $25-27 million guidance provided at the annual shareholders' meeting in late July.
The company reported ebit of $15.7 million for the year ended March, down from $28 million the previous year.
Metroglass bought Australian Glass Group, the third-largest glass processor in Victoria, Tasmania and New South Wales, in 2016 for almost $50 million.
It says a change to the lease accounting standard dragged the first-half result down by $600,000 and will shave $1.7 million off full-year ebit. The company will write a further $5 million off its NSW operations, half of that being cash costs – it has already provided $1.1 million.
Chief executive Simon Mander says New Zealand revenue fell 3 per cent to $109.6 million but ebit rose 2 percent, reflecting improved profit margins.
"Gross profit increased from 51 per cent to 52.8 percent following prior price increases and a higher value product mix," the company says.
"Metroglass NZ operations delivered improved customer experiences and operational performance through sustained continuous improvement initiatives," it says.
"Our commitment to delivering the best customer service in our market enabled us to strengthen our relationships with key customers and further differentiate our offering. This approach will continue to be critical, given the highly competitive markets we operate in," Mander says.
AGG's revenue grew 1 per cent in Australian dollar terms, including 3 per cent growth in the double-glazing segment, on the company rates as a key segment, but the first-half loss worsened from a $1.3 million ebit loss in the previous first half because of adverse currency movements and "pricing movements in a competitive market."
Mander says Metroglass has a "clear plan" and milestones for AGG and that customers, new and returning, have reacted positively.
The Victorian and Tasmanian operations are profitable and the NSW business has improved its operational performance and customer service. Double-glazing sales there were up 19 percent, although that was offset by declining margins and volumes of other processed glass.
"Despite our best efforts, NSW has continued to be a loss-making business. While we see long-term value and opportunity in the NSW market as the penetration of double-glazing increases, this will take time," Mander says.
The company is consolidating its Sydney operations to focus on double-glazing to window manufacturers and local production on non-window or processed glass will cease.
"We remain cognisant of the deteriorating market conditions in Australia and the challenges that AGG has continued to face," he says.
While the current restructuring will impact a significant number of Sydney-based staff, "we believe these changes will provide an improved competitive position and financial performance over the medium term."
Metroglass shares fell 12 per cent to 31 cents following the result, and while down almost 40 per cent from a year ago, had recovered from their 27.5 cent low in September. The shares were floated in August 2014 at $1.70 each.
Metroglass didn't declare a first-half dividend.