Skellerup lifts dividend as profit rises

MICHAEL FOREMAN
Last updated 15:36 20/02/2014

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Skellerup Holdings has reported a net profit of $10.8 million for the six months to December 31, an increase of 14 per cent on the corresponding period a year earlier.

The agricultural and industrial equipment maker has raised its interim dividend by 17 per cent to 3.5 cents to be paid on March 27 and has increased its full-year net profit forecast to a range of between $22 and $24m.

Skellerup had in October forecast a tax-paid profit of between $21m and $23m for the year to June 2014.

Revenue rose modestly to $97.3m for the half year, up from $95m in the prior corresponding period.

Skellerup said the performance of its agri division had reflected a strong domestic market while its industrial division results had improved after changes made to its cost base, product range and distribution capability over the past 18 months.

Chairman Sir Selwyn Cushing said Skellerup had made an encouraging start to the financial year.

"With net debt at $3.4m, down 25 per cent from $4.5m in the corresponding period last year and operating cashflow strong Skellerup remains in very good financial health and is fully able to execute its strategies and deliver shareholder value," Cushing said.

Chief executive officer David Mair said the half-year result highlighted the group's potential.

"Particularly pleasing was the performance of the industrial division where we have made changes to the business to improve our competitive position and distribution to market," Mair said.

"We have begun to realise earnings improvement here so that is encouraging.

"Once more the agri division was well underpinned by the strength of the New Zealand dairy sector where demand for our rubber liners and other agri-related products continued to grow."

John Cairns, senior equity analyst at Forsyth Barr, said the result was largely in line with the sharebroker's previous recommendations.

"The agri business has continued to perform and there is recovery in the industrial division," Cairns said.

"For me that was the standout in the result, as the industrial business has improved from the depressed performance in the last couple of years."

Operating profit in Skellerup's industrial division for the half year rose 18 per cent to $9.2m while revenue remained flat at $59.6m.

This reflected restructuring within the business and a focus on operating efficiencies, the company said.

In the United States growth was achieved from product and customer expansion for Skellerup's Gulf Rubber products.

Sales of Masport vacuum pumps also improved in line with a slight lift of activity in the oil and gas sector.

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Skellerup said its Australian businesses, including Flexiflo chute lining systems, Deks plumbing and roofing products and Gulf rubber products performed solidly in view of a challenging overall environment.

However, the company said it was beginning to see signs of improvement in this market and was well placed to capitalise and grow profits.

In the agri division operating profit rose 8 per cent to $8.9m on revenue which grew by 6 per cent to $37.6m.

In this market the New Zealand dairy sector continued to be strong and the resulting increase in farm conversions had underpinned demand for rubber liners and tubing, the company said.

Skellerup confirmed that construction of a dedicated dairy rubberware facility in Christchurch to replace its earthquake-damaged Woolston site was scheduled to begin this year.

Tenders for the facility had been recently received and were being evaluated.

Cairns said Skellerup's increased dividend and raised profit guidance were also positive developments.

Skellerup's shares were up 4.7 per cent, or 8c, at $1.79 in afternoon trading.

- Fairfax Media

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