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Skellerup lifts 1H profit 15% on strong industrial sales

Thursday 14th February 2019

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Rubber goods maker Skellerup Holdings expects a further increase in record full-year earnings after strong growth in its industrial business boosted first-half profit by 15 percent.

The company, which reported a 10 percent lift in first-quarter earnings in October, today reported net profit of $13.4 million for the six months through December, up from $11.7 million a year earlier. Revenue rose 3 percent to $120.2 million.

Earnings before interest and tax rose 11 percent to $19.4 million, with almost all the increase coming from the industrial arm’s sales to the global water, wastewater, roofing, mining and automotive sectors.

Chief executive David Mair said the 16 percent increase in operating earnings from the industrial division was driven by sales to US equipment makers and also vacuum systems application in consumer products.

“Our capability to respond quickly with prototypes and to deliver high-quality products has increased sales, particularly into potable water applications. In addition, our customer-driven product development has delivered earnings growth from products used in extractive industries and marine leisure applications.”

Skellerup will pay a first-half dividend of 5.5 cents a share on March 23, up from 4 cents a year earlier.

The Auckland-based company is forecasting full-year profit of $29 million-$31 million, up from the record $27.3 million reported in August.

Skellerup shares last traded at $2.05 and have gained almost 14 percent the past year.

The company, known for the gumboots, filters and milking equipment it supplies to the dairy sector, refocused its industrial unit in recent years after the collapse of commodity prices reduced demand from the energy and iron ore industries.

It turned its attention to the less volatile potable water and wastewater industries, which it sees as having more stable and sustainable growth prospects and which accounted for 40 percent of the division’s sales in the latest period.

The sales – 90 percent of them offshore - rose to $78 million during the six months, up 6 percent from the year before. Ebit climbed to $11.7 million from $10 million a year earlier.

Revenue from the smaller, but higher margin, agriculture arm fell 2 percent to $42.3 million and was down 4 percent on a constant currency basis. Ebit rose to $9.6 million from $9.5 million.

Mair attributed the earnings improvement to operational gains made at the firm’s operations in New Zealand and China.

Sales to local dairy and animal hygiene sectors were down on the prior year, reflecting reduced capital spending in the sector and the reduced forecast dairy pay-out. International markets were mixed, the company said.

Domestic footwear sales remained solid, while international sales grew, with sales in Europe particularly boosted by better volumes for firefighting boots.

The agri-division gets about 39 percent of its sales in New Zealand.


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