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Scott Technologies says growing customer demand helped push first half into profit

Wednesday 31st March 2010

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Scott Technologies, the Dunedin-based automated production and process machinery designer and manufacturer, bounced back from a difficult 2009 with a profit of $973,000 for the first half of the current year.

Scott, which posted a loss of $474,000 in the first half of 2009, today said the appliance, precious metals and meat processing markets that Scott’s sells into have all exhibited improved performance and trading conditions. That helped boost group revenue for the six months through Feb. 28 to $20.3 million from $13.5 million in the same period of 2009.

“Contracts for new projects destined for Australia, Brazil, China, Chile and the U.S. have stretched our capacity to a point where we have a requirement for additional resources,” chairman Stuart McLauchlan said. “In addition to these new projects, we have been working on, and completing production lines for customers in Australia, Turkey, the U.S. and Spain.”

Part of the order book increase has been due to getting around the world and ensuring that Scott wins contracts, while its efforts to diversify earnings now paying off, said McLauchlan. Pressure points are building on engineering and design peoples’ skills and capacity, with an increased use of outside sub-contracting seen as a way of handling the resource requirement.

“There’s often a bottleneck around design,” McLauchlan said. “Often designs will be one-offs, and getting a concept, your head around the idea and a solution within a client’s budget can be quite a balance.”

Increased activity in the meat processing market has been boosted by the establishment of Scott Technology Australia Pty. Ltd. in Sydney, which as well as allowing the rollout of commercialised systems, will also sell the X-Ray Primal, which allows automatic boning out of beef carcasses. Four of these X-Ray systems have been installed in New Zealand, and meat processing equipment is increasingly helping to remove the previous “lumpiness” in Scott’s earnings.

“With a strong balance sheet, improved trading conditions and a talented team of people, we are positioned to deliver on a growing level of current work and future prospects,” McLauchlan said. “We continue to assess business and growth opportunities,” he said.

McLauchlan cited the recently acquired Rocklabs as a successful growth opportunity. By automating processes within laboratory testing and then being able to let standalone equipment operate, Rocklabs has been able to sell IP-protected products to the resurgent mining industry.

“Rocklabs has been a very good acquisition, all pluses, no negatives,” McLauchlan said. “It gives us balance sheet strength, and helps get consistent earnings coming through. That’s the sort of acquisition we want, where we add value with automation.”

He said the company is in a growth phase that means it is hiring more people and that this is positive for the economy.

“It’s mostly all export dollars,” he said. “We’re in areas where we develop our own intellectual property and believe that we’re world leaders.”

In late March, Scott paid an interim dividend of 1.25 cents per share, and a 1-for-10 non-taxable bonus issue, which also participated in the dividend. Its shares are unchanged at $1.20 today.

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