Skellerup beats guidance with 23% drop in FY profit

Thursday 22nd August 2013

Skellerup, the industrial rubber goods manufacturer, beat its guidance with a 23 percent decline in annual profit following a pickup in the last two months of the financial year.

Skellerup made a profit of $19 million in the year ended June 30, ahead of its May 2 forecast of $17 million, but below the year earlier $24.7 million, the Auckland-based company said in a statement. Revenue fell 8.6 percent to $189.5 million on lower sales in its industrial division. In May it forecast a profit of $17 million.

Skellerup revised down its earnings guidance twice in the past year as a drought across the North Island sapped demand at its agri business unit and as its North American and European sales tracked below forecasts. Still, the agri business bounced back after the drought with strong liner, tubing and footwear sales and the industrial unit exceeded expectations on higher sales of industrial rubber products and vacuum pumps into the US and Flexiflo chute linings into Australia.

“The outlook for the year and beyond is positive,” chairman Selwyn Cushing said in a statement. “Our agri business continues to provide us with steady underlying earnings even during difficult times as just experienced. The industrial business had a tough year however we expect to see a stronger performance in the current financial year.”

In the company’s industrial division, earnings before interest and tax dropped 40 percent to $13.5 million as revenue slipped 12 percent to $116.9 million as lower oil and gas exploration activity reduced earnings from vacuum pump sales in the US and a softer Australian economy reduced earnings from its Gulf Rubber business.

The industrial unit’s performance reflected a slowdown in demand rather than a loss of business, which means that the company remains well positioned for any pickup in activity as economic conditions in its core markets improve, Skellerup said. The company had refined its products, developed new products and relocated operations closer to customers during quieter patches, it said.

In the company’s agri division, which manufactures and distributes products for the global dairy industry, earnings before interest and tax increased 4.2 percent to $19.8 million as revenue fell 2.3 to $72.4 million.

Skellerup said construction would start early next year on its new Christchurch manufacturing facility.

The company reduced its net debt by 49 percent to an historic low of $2.2 million.

The company will pay a second half dividend of 5 cents a share, taking its total payment for 2013 to 8 cents, unchanged from the year earlier.

The shares traded yesterday at $1.35 and have declined 15 percent this year.

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