Turnaround signs get stronger at Mercer

Christchurch-based Mercer Group is emerging from the early stages of its ‘‘resurrection’’, according to chief executive Richard Rookes.

Two top executives left the company in 2015 when Rookes took up the challenge to turn the company around, selling two subsidiaries, raising capital and reducing debt and staff numbers.

The company is best known for its stainless steel fabricated products for the dairy, food and wine sectors, providing 70 per cent of its $26 million revenue for the year ending June 2017.

But Rookes said Mercer’s future also lies with the robotics technology of subsidiaries Haden & Custance bought last year, and medical sterilisation company S-Clave.

At the recent annual meeting Rookes revealed that the tank Mercer supplied to the Edendale milk factory was estimated to have cost Fonterra a final loss of $20 million, about half of earlier reports, after it collapsed a year ago.

Rookes said there had been no claims or discussion about liability. ‘‘We’re continuing to do a lot of work with Fonterra and have insurances in place,’’ he said.

The number of people employed at the Christchurch and New Plymouth fabrication factories had been cut, saving $2.1m. Total restructuring costs were $2.2m.

But Rookes said he wasn’t prepared to provide a ‘‘hard’’ profit forecast for the coming year except to say earnings before interest, tax and deprecation would be positive.

While stainless steel fabrication still made up most of the company’s revenue, the amount had reduced to $21.5m this year from 24.5m in 2016.

The reduction in earnings from stainless steel fabrication had been offset by an increase in the sale of machines and trading at Haden & Custance.

The S-Clave business is likely to become commercialised in the first half of 2018.

Mercer was reducing debt down to 45 per cent. The board would consider options for capital raising in the next few months.

Part of the recent restructuring involved raising $7m at 20 cents a share last year from shareholders, with a smaller capital raising of $1.2m a month ago at 40c a share, reflected in the current share price.

The major shareholder is former director and Christchurch businessman Humphry Rolleston, who holds a 56 per cent stake.

PHOTO: SUPPLIED The price of butter has soared in the past 12 months, although not generally as much as this block spotted at a dairy in Akaroa recently.

PHOTO: DANIEL TOBIN/STUFF Richard Rookes says earnings will be positive in the coming year.