Australian warehouse market drags racking arm sales figures and profits down
Manufacturing group GUD is looking for a lift in its Dexion subsidiary following a troubling first half of the financial year.
The tepid performance has been sheeted home to a domestic industrial racking market in the doldrums resulting in a 10 per cent reduction in sales to $86.5 million while underlying gross earnings were down 118 per cent to $700,000.
This in turn has spurred write-downs revealed in the group’s first-half results.
“Recognising that getting Dexion to acceptable levels of return is taking longer than anticipated, we have written down Dexion’s goodwill by $15 million and taken a write-down on obsolete and slow moving inventory of $4 million pre-tax,” MD Jonathan Ling says.
“Dexion’s performance in the half was negatively affected by weak project demand in the Australian racking products market and recovered overhead costs associated with operating the Malaysian factory at volumes below its break-even position.”
The lack of any major Australian racking project has been partially offset by strong racking project activity in New Zealand, Asia and Middle East.
While Dexion’s order bank remained essentially the same as June 30 ant $62 million, “orders on the Australian racking business increased appreciably over the half and this, when combined with progress on current major projects in out other marker areas, provides and improve outlook for sales in the second half”, the group says.
So, despite the tough times, GUD expects Dexion’s second half to see improved sales due to stronger Australian order bank and progress on current major projects.
Reported group net profit after tax of $1.7 million was down from $17.3 million for the previous first half.
This includes $18.5 million after tax of impairment costs, predominantly goodwill in Dexion.