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Daily ShareChat: Skellerup

By Jenny Ruth

Thursday 8th July 2010

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 Jenny Ruth

John Cairns at Forsyth Barr says he had considered Skellerup's previous guidance of an $8.5 million annual net profit was conservative and he had been forecasting $9.1 million.

But the company's latest guidance is for considerably higher, between $10 million and $11 million.

"Trading conditions over the June quarter in the industrial division have been particularly buoyant and provides vindication of the strategy to focus on global technical polymer products," Cairns says.

Skellerup's core agri liner consumables business remains relatively steady. While demand for dairy-related capital products remains soft, the rising milk price has led to a pick-up of enquiry levels.

"The revised guidance provides evidence that earnings momentum will be driven by new products and customers of its industrial division," Cairns says.

"These products leverage off the core competency of producing a wide range of rubber products with composite moulding."

However, Cairns isn't getting too carried away just yet: "Skellerup has been a perennial disappointment."

He has still upgraded his forecast of Skellerup's earnings before interest and tax (EBIT) for the year ended June to $21.1 million from $17.6 million previously, which compares with the $19.3 million EBIT the company reported for the year ended June 2009. He has also raised his 2011 EBIT forecast from $22.3 million to $25.1 million.

Recommendation: Accumulate.


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