By Jenny Ruth
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Friday 25th February 2011 |
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Skellerup Holdings's strategy of driving organic earnings momentum through new product development is clearly gathering momentum, says John Cairns, an analyst at Forsyth Barr.
The company's $15.5 million in first-half operating earnings before interest and tax (EBIT), up more than double on the previous first half, was ahead of Cairns' $13.9 million forecast.
"The result reflects a continuation of the earnings recovery evident over the second half of 2010, driven by stronger demand and new product launches, with both the agri and industrial divisions performing ahead of expectations," Cairns says.
The agri liner consumables new product ranges are growing market share in existing markets and spearheading entry into new regional markets, he says.
"In addition, a strong global milk price has boosted confidence levels in the diary industry worldwide." This has yet to flow through to spending on capital items such as diary vacuum pumps, he says.
The industrial division's revenue rose 15%, benefiting from growth in its new technical polymer products. The strong oil price has stimulated activity in US on-share oil fields and boosted demand for rotary vane vacuum pumps.
Reflecting the strong result, Cairns has lifted his full-year net profit forecast by 2.6% to $20 million (compared to $12 million last year) and raised his valuation of the shares from $1.41 to $1.45.
Recommendation: Buy.
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