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Tenon delivers $2m profit in first half, on track for 2016 dividends

Tenon, whose locally produced wood mouldings are sold in the US, turned a first-half profit as an improving US housing market pushed revenue, as forecast by the company, and signalled plans to pay dividends in the 2016 financial year.

The Taupo-based company reported a tax-paid profit of US$2 million in the six months ended Dec. 31, compared to a breakeven result a year earlier, it said in a statement. Revenue increased 6.1 percent to US$209 million, with gains largely in the pro-dealer regions it services, who in turn supply the home construction market. Earnings before interest, tax, depreciation and amortisation rose 20 percent to US$6 million, which didn't include a depreciation in the New Zealand dollar. That occurred late in the period and was covered by Tenon's hedging policy.

"Over the past 12 months US new home construction has now begun to lift to a new level, and this improvement in industry activity levels is beginning to flow through into Tenon's financial performance," the company said.

In December, Tenon said it was considering merger and acquisition opportunities to capitalise on the recovery in the US housing market, and the firm has been buying back shares on-market to lift what it sees as a sagging share price.

The stock fell 0.5 percent to $1.86 prior to the announcement after the close of trading, and has edged up 1.1 percent this year.

Tenon said it plans to put a future dividend stream in place for shareholders, and provided the US housing market improves and New Zealand's currency stabilises, anticipates it will be able to "announce the introduction of dividends at some stage during our fiscal 2016 year."

The company said it expects earnings to keep improving in the second half of the 2015 financial year, provided it's not blindsided by adverse events such as interest rate changes in the US, unfavourable log prices, the exchange rate and labour issues at US West Coast ports.

Tenon said it is installing an advanced product procurement system to manage its trans-Pacific supply chain, which it says will optimise inventories, cut operating costs and increase sales. The company will update shareholders on the project when it reports its annual result later this year.

Tenon's recent financial performance meant it was able to release a US$7.5 million 'block' reserve that its banking syndicate had previously held against its borrowing collateral, which Tenon can now draw upon.

Tenon had drawn on US$49 million of its US$70 million banking facility as at Dec. 31, down from US$53 million a year earlier.