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Mercer Group shares plummet to record low

NZ NewswireNZ Newswire 20/10/2016 Tina Morrison

Mercer Group shares are languishing unloved at a record low on the stock exchange as the unprofitable stainless steel fabricator restructures its operations, undertakes a refinancing to keep it afloat, and faces questions about its products after one of its stainless steel silos collapsed last month at Fonterra's biggest factory in Edendale, Southland.

Shares in Mercer Group last changed hands a week ago at 1.3 cents, the lowest level the shares have traded at since NZX records began in 1967.

The metal manufacturer, whose history stretches back to 1884 when founder James Mercer started a South Island coppersmithing and metalworking firm, has lost three-quarters of its value on the stock exchange this year, reducing its market capitalisation to $4 million.

Shareholders at the company's annual meeting in Christchurch this week approved a plan to inject $7m of new shareholder equity to repay debt and keep it afloat following three years of losses.

Chief executive Richard Rookes told shareholders that the silo collapse is still being worked through by its fabrication division and the cause and any impact on Mercer is "unknown at this time".

Mercer's equipment is in the majority of dairy plants across New Zealand and news reports on Thursday say an additional four Fonterra silos have been found to have cracks.

Fonterra wasn't immediately able to confirm the reports.

"Whatever the outcome, it's not going to be good news for Mercer," said Grant Williamson, a director at brokerage Hamilton Hindin Greene, noting the company may face compensation claims.

While the company's sterilisation technology appeared to have good potential, it would take time to bring to market and the company needed to turn around the performance of its stainless and slicing businesses to try and achieve at least break-even so they are not burning any more cash, he said.

"It's a possible turnaround story but I think it's going to remain a struggle for the company for some time," he said.

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