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Skellerup lifts profit after second-half recovery

Wednesday 25th August 2010

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Skellerup Holdings posted full-year profit that beat its guidance after a recovery in second-half trading and forecast increased earnings for 2011.

Net income rose to $11.96 million in the 12 months ended June 30, from $8.99 million a year earlier, the company said in a statement. Sales excluding revenue from discontinued operations flat-lined at $180.7 million.

Shares of Skellerup rose 2.7% to 75 cents after the announcement and have surged 43% this year. Earnings exceeded the company's June 30 forecast of $10 million to $11 million and chief financial officer Guy Keogh said trading NPAT for 2011 would be $16 million to $17 million, up from $14.5 million in the 2010 year.

Revenue climbed 16% in the second half, helping make up for a weak first half when the long-tail of global recession reduced demand for the company's products.In its industrial division EBIT was up 158% from the first half on increasing demand for pipe rings, gaskets, appliance industry parts and drive shaft couplings for the auto industry.

The Agri division lifted EBIT by 40% in the second half compared to the first six months of the year. It gave no year-earlier comparisons. Demand for capital items, such as dairy vacuum pumps, remained "suppressed" as a result of a drop off in dairy farm conversions, it said.

The company cut debt to $26.6 million from $64.7 million, after raising about $20 million in a 2-for-5 rights issue, better use of working capital and increased earnings, it said. Debt to debt-plus-equity improved to 21% from 48%.

The company will pay a final dividend of 2.5 cents a share after omitting the year-earlier payment as the economic downturn eroded earnings.

The have been "encouraging signs" that global markets for the company's industrial products are recovering though recent economic data out of the U.S., Europe and to a lesser extent Australia suggest growth may be more gradual and patchy than initially expected, Skellerup said.

The outlook for industrial products is "positive" and the divisions will continue to add to earnings provided the automotive market continues to recover and demand grows for roofing, plumbing and general industrial products, it said.

It predicts a "steady" increase in demand for products in its Agri division though sales of capital equipment may be delayed given softening in dairy prices over recent months.

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