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Skellerup claws out of recession despite profit dive in first half

Thursday 18th February 2010

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Skellerup Holdings, the agricultural and rubber goods manufacturer, has begun to pull out of the worst impacts of the global recession, reporting a $3.28 million net profit after tax for the six months to December 31.

While that’s a 48.8% drop on earnings to Dec. 31, 2008, it represents a slight improvement and reflects stronger sales and effective cost control than in the last half of the previous financial year, which contributed only $2.6 million of the 2008/09 year's net earnings of $9.2 million.

Earnings per share of 2.03 cents compare with 4.92 cps in the previous corresponding period.

The company expected earnings in the current financial year of "up to $8.5 million", said Skellerup chairman Sir Selwyn Cushing in a statement. In the year to June 2008, before the financial crisis hit, Skellerup produced a $12.6 million profit.

While revenue from operating revenues was down 13.5% on the previous corresponding period at $85.6 million, that was still a 4.6% improvement on the six months to June last year, when the recession was at its worst.

Operating cashflow of $12.6 million was up 19.1% on the same time a year earlier, and up 2% on the previous six months.

An interim dividend of 2 cents a share will be paid on 31 March.

"The Improvement in revenue and NPAT on a sequential basis reflected positive actions taken to lessen the impact of the recessionary conditions by reducing costs and developing new revenue streams through the introduction of new products and markets," said Sir Selwyn. "Whilst the recessionary conditions continue to impair business growth worldwide, the results confirms that the impact of our group's operations is diminishing."

There was "growing confidence that the second half of the current year would see a marked improvement in profitability".

"It is clear that the worst of the recession is over," Sir Selwyn said.

Skellerup's industrial division earnings for the six months to Decemebt fell 38% on the same period a year earlier, but an improvement on the breakeven result achieved in the second half of the last financial year.

Sales of products in the company's agricultural division were down 15.4% and earnings down 25%. Much of the product range is consumables, which require regular replacement, and these outperformed sales of capital goods.

At the half-year mark, inventories appear tightly managed, totalling $28.268 million at December 31, compared with $35.029 million a year earlier.

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