Skellerup posts 7.5% drop in first half profit, maintains full-year guidance

Skellerup Holdings' first-half profit fell 7.5% due to weaker sales to the mining sector in Australia and higher finance costs for a new factory in Christchurch.

Profit slid to $8.9 million, or 4.63c per share, in the six months ended Dec. 31, from $9.6 million, or 5c, a year earlier, the Auckland-based company said in a statement. Revenue declined 9.5% to $97.3 million. The result is weaker than the $100.5 million revenue and $10 million profit forecast by brokerage Forsyth Barr.

Skellerup's industrial division, which supplies polymer products and vacuum pump equipment, posted a 6.2% drop in earnings before interest and tax, primarily due to lower sales into the Australian mining sector and the impact of a stronger New Zealand currency. Earnings edged up 1.5% at its agricultural unit, which provides rubber products to the dairy industry, as the performance of the US, New Zealand and Australian markets offset weaker European demand.

"Skellerup's investment into developing new products in international markets and solid agri sales in the New Zealand market only partially offset the effects of lower sales in some of our commodity-affected markets and the strength of the New Zealand dollar in the first half of the year," chair Liz Coutts and chief executive David Mair said in a statement.

"Recent improvements in dairy commodity prices are an encouraging sign for the agri division. The second part of the year is traditionally a stronger half and the start has been positive. We are cautiously optimistic regarding the prospects for the coming six months.

"We have also seen a lift in the oil, gas and iron ore prices, which influence our industrial division's results. The improvement of our product range across all of the businesses in this division underpins prospects for the second half of the year."

The company retained its forecast for annual profit of between $20 million to $22 million, from $20.5 million a year earlier.

For the agricultural unit, ebit advanced to $8.4 million from $8.3 million, while revenue slid 11% to $36.6 million. In the industrial unit, ebit dropped to $7.2 million from $7.6 million as revenue declined 9% to $60.8 million.

The company's finance costs increased to $554,000 from $125,000 a year earlier, due to higher debt as a result of the agri unit's new rubber factory in the Christchurch suburb of Wigram. Its net debt at December 31 stood at $35.6 million, up from $17.6 million a year earlier.

Skellerup will pay a dividend of 3.5c per share on March 23, unchanged from the year earlier.

Its shares last traded at $1.61 and have gained 20% over the past year.

(BusinessDesk)