Skellerup annual profit slides, forecasts 2017 increase

Skellerup Holdings' annual profit fell 6% as weaker demand for products in its agricultural business weighed on improved earnings from its industrial unit.

Profit slid to $20.5 million, or 10.65c per share, in the 12 months ended June 30, from $21.9 million, or 11.38c, a year earlier, the Auckland-based company said in a statement. That's within its April forecast for profit of between $20 million to $21 million. Chairman Selwyn Cushing says earnings are expected to improve in the coming 2017 financial year.

Skellerup's industrial division, which supplies polymer products, increased earnings before interest and tax by 8.7% and the company expects the unit's earnings to improve. However, earnings slid 15% at its agricultural unit, which provides rubber products to the dairy industry, as weak milk prices prompted the postponement of some spending.

"Demand for our milking liners held up well as these are an essential consumable. However, demand for tubing and other products was down as farmers are more able to defer expenditure on these items," says chief executive David Mair.

A diverse range of products and markets helped shield the company from the effect low commodity prices were having on its customers in the dairy, oil, gas and mining industries, he says.

For the agricultural unit, earnings before interest and tax fell to $18.8 million from $22.1 million, while revenue slid 1.1% to $79.6 million. In the industrial unit, earnings before interest and taxes (ebit) rose to $15.3 million from $14 million as revenue lifted 7.4% to $132 million.

North America edged ahead to become the company's largest market by revenue in the latest year, improving 15% to $57.8 million. Australia was the second-largest, up 1.7% to $51.8 million, while revenue in New Zealand declined 6.3% to $45.7 million. In Europe, revenue advanced 3.4% to $26.6 million.

In the past year, the company's management focused on improving its performance to counter the impact of tougher markets, Mr Mair says, noting its operating cash flow increased to $30.9 million from $17.8 million a year earlier.

"We expect to continue to generate strong cash flow which provides an excellent dividend stream for shareholders and the ability to invest in our business," he says.

Skellerup will pay a final dividend of 5.5c per share on October 13, taking the total dividend for the year to 9c, unchanged from the year earlier.

Its shares last traded at $1.40 and have declined 7.3% this year.

(BusinessDesk)