Why did Metro Glass’ (NZX: MPG) shares move up 10% today?

Highlights

• MPG’s FY22 performance was below expectations due to COVID-19 pandemic-related challenges
• In FY23, the focus is on being resilient and improving its Australian market share
• The stock was up 10% in today’s trade

Metro Performance Glass Limited (NZX: MPG) is an NZ-based glass solutions company.  Together with its subsidiaries, it supplies processed flat glass and related products for residential and commercial buildings across NZ and Australia. The stock gained 10% in today’s trade but has been very volatile in recent months.

The Company's strategy comprises of four pillars: market-leading service to customers, developing its organisational capabilities and utilising the scale and leadership position across channels. MPG improves the quality of its assets to deliver glass solutions efficiently.

Image source: © Enjoylife25 | Megapixl.com

FY22 Financials

FY22 was a challenging year. There were a number of pressures, including supply chain disruptions and local effects of the COVID-19 pandemic like sickness and the absence of staff members. Lockdowns in various parts of the country also had an impact in the first part of the year. Global impacts of the pandemic included inflation, leading to high costs and unreliable shipping schedules.

In spite of all this, the Company was able to re-establish its gross margin by increasing prices. The working capital increased driven by a greater volume of stocks. As a result, the group EBIT was NZ$5.9 million, which was at the low end of its range of the February guidance.

The company continued with its major capital intense long-term plans. Its plans to diversify its product portfolio in New Zealand are progressing well. It believes that it has passed its peak and sees the debt decreasing over a period of time in FY23.

While in New Zealand, the sales have improved in some segments, in others, it has been maintained. In Australia, they have been improving its position.

FY23 Outlook

MPG did not provide any guidance due to the uncertain economic environment but claims to be focused on being resilient and providing operational performance. It expects to maintain a customer connection and grow profitability in Australia due to increasing demand for double glazing.

The Company will also ensure in FY23 that its balance sheet is robust to handle future risks and opportunities. For that, the Company is working on restoring cash flows and its main focus will be on debt reduction.

However, the construction activity needs to pick up for the overall performance of MPG. Economic indicators prove that the challenging time will continue, and construction activity is likely to be subdued. In this scenario, the Board aims to have a 1:5 net debt to EBITDA ratio and accordingly, the Company is considering declaring a dividend also.