Skellerup lifts annual profit 6%, beating guidance; shares rise

Thursday 20th August 2015

Skellerup Holdings, the industrial rubber goods firm, lifted annual profit 6 percent, beating expectations, as a focus on the US, China and South American markets offset a downturn in Australia and New Zealand.

The Auckland based company said profit rose to $21.9 million in the year ended June 30, from an underlying profit of $20.7 million the year earlier which excluded a one-time gain of $20.4 million from a Canterbury earthquake insurance claim. Sales rose 3 percent to $203 million. The result is ahead of Forsyth Barr's estimate for profit of $21.1 million and sales of $196.2 million.

Skellerup shares climbed 5.1 percent to $1.24 in early trading and have declined 17 percent since the start of the year.

Last October the company flagged annual earnings growth of up to 18 percent, with a range between $21 million to $24.5 million as it looks to cash in on growing demand for food safety and clean energy applications.

However, in March the company slashed that guidance, saying it expected annual earnings growth to stall after Australian mining customers delayed maintenance spending. Meanwhile, a global glut of milk has seen the price of New Zealand's largest export commodity, dairy, drop sharply, leaving farmers with less cash to spend on updating equipment.

The focus on the growing international markets helped offset the decline in local sales for Skellerup's agri division, which manufactures and distributes dairy rubberware and other related agricultural products.

"Increasing global milk production and continuing strong demand for dairy products, particularly in developing countries, provided excellent growth opportunities for the agri division," chief executive David Mair said. A "strong finish to the year" while a shift in focus to markets that showed signs of growth, such as the US, had boosted profit.

“While the headlines in the US continue to concentrate on the financial sector’s performance, other sectors in the real economy are performing strongly,” he said. “To take one example, the need for cities across the US to invest in the renewal of water and waste water infrastructure throughout the US is well known. Working with key partners has led to innovative product solutions and significant business opportunity for us in a sector in which we are achieving success already.”

Sales in its North America segment rose 20 percent to $50.4 million, to become Skellerup's second largest market. Australia sales slipped 1 percent to $51 million, while still overtaking New Zealand to become the company's largest source of income. Domestic sales dropped 9.7 percent to $48.7 million.

Revenue from Europe increased 6.5 percent to $25.7 million, while UK and Ireland sales declined 2.2 percent to $13.3 million. Sales in Asia increased 34 percent to $10.4 million.

The agri division's earnings before interest and tax rose 1.9 percent to $22 million, while sales edged up 0.3 percent to $80.5 million.

The company's industrial division, which sells equipment in to the construction, mining and automotive industry, reported a 5.8 percent gain in Ebit of $123 million, while sales increased 3.8 percent to $14 million.

The board declared a final dividend of 5.5 cents per share, bringing the total pay out to 9 cps, an increase of 6 percent over the year.

BusinessDesk.co.nz

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