Mercer Group seeks growth

Stainless steel manufacturer Mercer Group says it will chase growth and employ extra staff despite a weaker first-half bottomline performance.

Mercer has reported a first-half net profit of $407,000, down from the $589,000 profit for the six months to December 31, 2012.

Its shares were trading 1 cent lower at 20c after the release of the result.

The company's directors say Mercer's earnings performance in the next six to 12 months will be affected by the investment in people and technology to drive sales growth and increase profitability in the medium term.

"The investment in people will impact earnings for 12 months as we front-load the expense to lift medium term performance," managing director Rodger Shepherd said in a statement.

The signing of an S-Clave agreement for the North American market was a highlight for the six months under review. It had licensed the "breakthrough sterilisation" technology to a medical corporation to help commercialise the product for United States and Canadian hospitals.

The company was in the process of applying for funding support for the next phase of the project in New Zealand including the hiring of more research and development staff, Shepherd said.

"The potential of this technology is significant to the value of the company, albeit sales into hospitals are likely to be at least two years away."

Another half-year highlight was winning installations for Titan meat-slicing equipment for two very large North American customers. The work was due to take place in March.

Having secured $600,000 from New Zealand Trade & Enterprise, Mercer would use the funds in the next two years to accelerate market penetration in North America.

Mercer's larger shareholders include the Rakaia Fund, which holds more than 36.17 per cent, Shepherd and Christchurch businessman Humphry Rolleston.

Mercer reported revenues of $21.35 million in the half, down from $21.84m in the six months to December 31, 2012.

Shepherd said the company's stainless fabrication order book was full through to the end of June.

"We anticipate a stronger second-half result from this division but we will continue to invest in people, particularly around Titan and other Mercer-owned equipment."

There had been an upgrade to the interior division's Christchurch sinkware plant, to manufacture tight-radius sinks for the building market, including the Canterbury earthquake rebuild. Demand for the new sinkware was strong and the company was gearing up to run a second shift at the plant in April once new production staff were secured.

Mercer was forecasting operating profit for the financial year to June 30 of about $2m, compared with $1.108m for the six months to December 31.

The company continues to review complementary acquisition opportunities, with one such opportunity under consideration. No dividend was declared.

Fairfax Media