Uncertainty around Matrix

Matrix Composites and Engineering (ASX:MCE) manufacture buoyancy devices for offshore oil and gas producers and explorers. I collected a handful of stock over the last couple of weeks during the volatile period.

Today the company reported their FY11 results. Although the year-on-year numbers are good, there were a few worrying items that had caught my attention.

• Second half of the year wasn't flash. Revenues were similar to first half but NPAT was down so margins shrank. NPAT margin from 20.9% to 15.1%.
• Warned of some margin pressure due to "competitive pressures" and AUD strength. Margin squeeze from competitive pricing is never a good thing.
• Order book $110m. Same time last year it was $180m. Seems risky if they're expecting 20% revenue growth.

If the second half margins is the new trend, FY12 will see flat NPAT even if they hit their 20% revenue growth guidance. This will translate to lower EPS due to the company raised funds during the last part of FY11.

So unsure about the company's prospects, I decided to liquidate my holdings right after the market opened. Probably better sitting on the outer at this moment in time.

MCE was down 10% to $4.72 at today's close.