Diversification pays for Scott

Chris Hopkins
Chris Hopkins
Dunedin-based Scott Technology's diversification in recent years has paid dividends as its niche mining division took up the slack from challenging trading in its appliance manufacturing division.

Scott shares leapt almost 5% to $1.70 following the announcement.

With sales rising 35% to $29.4 million for the six months to February, Scott yesterday posted a rise in after-tax profit from $1.6 million a year ago to $2.1 million for the most recent period.

Scott managing director Chris Hopkins said in a market statement there was strong demand for appliance production lines in China and Australia, also robotic meat processing applications for Australia.

"The global increase in demand and prices for commodities continues to drive strong sales for our mining equipment and [mining related] consumables," he said.

However, interest for appliance production lines for the US, historically a significant driver of Scott's business, was "variable" and demand from Europe "is almost non-existent", he said.

"New orders for large capital projects have reduced as uncertain markets globally slow decisions on capital expenditure or defer projects," Mr Hopkins said.

That loss of workload has been replaced by an increase in smaller projects, upgrades and standard equipment. It is expected the introduction of several new products would also boost overall demand, he said.

All areas of the business are fully engaged with forward work extending towards 2013, although new orders for large capital projects have dropped, reflecting uncertain markets globally, and have been replaced by an increase in smaller projects, upgrades and standard equipment, BusinessDesk reported.

"The introduction of several new products also boosts overall demand," the company said.

Scott said it continued to invest in research and development for HTS-110, which designs and builds high temperature superconductors and electromagnets and which contributed a small operating profit.

Demand for its meat processing systems is showing "strong forward momentum" following recent successful installations in both Australia and New Zealand.

The company is actively looking at ways to expand skills and capacity, both through organic growth and acquisitions.

Its latest purchase last September was of a 75% stake in a Chinese manufacturing facility for $975,000.

Scott said the facility's existing contract manufacturing should cover ongoing costs while providing it with a base to take advantage of opportunities within the Chinese and wider Asian markets.

Its head of appliance systems has transferred to China to oversee this process, which will place Scott "geographically closer to our main appliance systems markets and will assist us to better service and develop these markets."

Scott will pay a fully imputed 2.5c per share interim dividend, to which the dividend reinvestment plan will apply, up from 2c last year.


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