Share of the week: Scott Technology

Saturday 17th April 2004

A weaker interim profit has done little to dent the confidence in Dunedin-based Scott Technology as investors continue to chase the stock for its good prospects.

The company posted a profit of $1.87 million for the six months to February 2004, down 25.2% on the previous corresponding period. Since then the shares have climbed to near their all-time high of $3.25 last December.

The company said the strong Kiwi dollar and the uncertainty of global markets made a challenging year. Sales at the maker of automated production machinery fell from $23.35 million to $16.88 million, well down on their peak of $30.7 million in 2000.

The company has been vulnerable to economic trends, no more so than in 2001 when a heavy slowdown in capital expenditure by firms worldwide halved Scott's revenue and cut earnings to just $415,000.

But Scott has no debt and plenty of cash and investors will be encouraged by the company's bulging order book, including negotiations on two substantial contracts in the US and Mexico valued at over $8 million.

Investors may also be backing Scott's recent expansion into robotics, which promises to help it diversify away from reliance on making machines that make appliances into the food, beverages and packaging industries.

Almost all its export production goes to North America, where it counts Whirlpool, GE, Electrolux and Maytag among its customers. In the US, more than 60% of ovens are produced using Scott machinery.

The company is not run by hotheads CEO Kevin Kilpatrick, an engineer, has worked there for 35 years but seems to have plenty of fresh ideas.

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