Sharechat Logo

Skellmax Industries escapes China syndrome

By Nick Stride

Friday 29th August 2003

Text too small?
Given the woes of Lion Nathan, Affco, Aquaria 21 and others, the words "China venture" these days send a shiver down investors' spines.

This might help explain the unenthusiastic sharemarket reaction to Skellmax Industries' strong profit result last week but managing director Donald Stewart said shareholders need not fret.

For one thing Skellmax' Chinese plant, being set up three hours north of Shanghai, will cost only $2 million.

For another it will be export-only, mostly back to New Zealand and to Australia, and won't be tackling the Chinese domestic market, for now at least.

Skellmax, which listed in June 2002, last week hit its prospectus forecasts square-on with a net profit of $12.6 million.

The company is now on the acquisition trail, looking for operations that "will absolutely click into our distribution and fit our brand," Mr Stewart said.

Skellmax is scarcely in a glamorous line of business but according to sharebroker ABN-Amro it "has the potential to expand its global dominance in the dairy rubberware industry and dominate the fragmented global market of vacuum pumps for industrial applications."

Mr Stewart said he had a list of about 10 potential acquisitions on his desk at any one time.

Most were turned down and some were never even investigated.

Even so, he said, the balance sheet could stand more debt if the right opportunity arose.

Skellmax' net borrowings of $18 million translate into a ratio of net debt to net debt-plus-equity of 41%.

Last year's one smallish acquisition, Australian dairy milk filter maker Stevens Filterlite, will add about $2.5 million to the company's revenues.

The China plant, an example of its organic growth aspirations, is expected to add between $6-10 million within three years.

The company has also cropped up on competitors' radar screens. Trelleborg, a far larger Swedish-based maker of general and technical rubber goods, has had a look, Mr Stewart said.

Skellmax has manufacturing sites and distribution for both its pumps and its rubber goods in the US and exports to 40 countries in South America, the Middle East and Asia.

It is not looking at setting up anywhere else but may expand a modest Australian facility and looks from time to time at setting up European distribution.

It is well-insulated against the higher New Zealand dollar, with a net annual exposure ­ exports worth $US12 million less imports worth $US5 million ­ of $US7 million covered by $US35 million of cover at 48USc.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report