Tenon Reports Solid Financial Performance

Tenon Reports Solid Financial Performance For Half-Year To 31 December 2006

Note: All dollar amounts are United States dollars. AUCKLAND, 15 February 2007 – Tenon today reported earnings before interest, tax and depreciation (EBITDA) for the 6 months ended December 2006 of $9 million - up 50% on the $6 million recorded in the comparative 6 month period ending December 2005.

Commenting on the result, which was in line with market expectations, Chief Executive, Mark Eglinton, said, “In light of the very challenging business environment experienced in the second quarter, we consider it to be a solid financial performance for the Group.” Explaining the magnitude of the change in trading conditions that occurred, the Company said new house building starts in the US for the 6 month period were 22% below the same period in 2005 and renovation market spend was flat. “These factors, combined with a continued high NZ exchange rate against the US dollar, resulted in prices for Moulding & Better lumber (in New Zealand dollar terms) finishing the half-year at their lowest levels since we entered the market in 1995,” he said.

The Company said that the fact that it was able to achieve a 50% increase in EBITDA for the half-year despite the very difficult macroeconomic conditions experienced throughout the period, was a direct result of the business restructuring that had taken place in Tenon over the past 12 months, which has been designed to strengthen its business model and operational competitiveness.

This restructuring includes the benefit flowing from: • Tenon’s exit (in November) from its under-performing 50% investment in American Wood Mouldings • The purchase of 100% of Ornamental Mouldings - a manufacturer and distributor of decorative mouldings with operations located in North Carolina, USA and Ontario, Canada; • A full six months earnings from Southwest Mouldings; • The ongoing implementation of the Company’s cost reduction programme, including the conversion of the Taupo site to lower-cost geothermal energy, the renegotiation of freight rates from New Zealand to the US east coast and log procurement initiatives.

Mr Eglinton said “We continue to focus our efforts on maximising sales opportunities, such as the new supply agreement with BlueLinx announced this morning (see BlueLinx’s press release attached to this release), North America’s largest distributor of building products, and we continue to achieve savings in delivered costs as demonstrated by the ongoing profitability of our NZ operations during a period of extremely low NZ dollar pricing.”

The Company said that with the Ornamental/American Wood Mouldings transactions now completed, the focus would move to fully integrating the business into the wider Tenon Group. The net positive effect from the acquisitions of Southwest Mouldings in November 2005 and Ornamental Mouldings in November 2006, together with Tenon’s exit from American Wood Mouldings, enhanced EBITDA for the half-year by approximately $2.5m compared to the corresponding period in 2005.

Mark Eglinton said “We are working to extract the incremental ‘One-Company’ synergies from these acquisitions by operating them as part of the wider integrated Tenon Group. This will be our focus for the balance of the year, and it should bring benefits both to our customers and our bottom-line earnings.”

The Company said that the overall result for the six months reflected a cyclical low point in the US market. “Importantly”, said Mark Eglinton, “most commentators are now predicting that later in this calendar year market conditions will improve off the current low base. The structural changes we have made now position Tenon well to participate in a broad market recovery,” he said.

ENDS

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