Skellerup’s industrial arm the standout

Damian Foster
Damian Foster
Skellerup's industrial division was the standout in the first half of the 2018 financial year, Forsyth Barr broker Damian Foster said yesterday.

The division lifted its earnings before interest and tax (ebit) by 40% against the still solid 13% growth for the agricultural division.

Skellerup reported an operating profit of $21.3million for the six months ended December 31, up 26% on the $16.9million reported in the previous corresponding period.

Ebit rose 32% to $17.5million, and the reported profit also rose 32% to $11.7 million. Revenue rose more than 20% to $116.7 million.

Skellerup announced a 0.5c-per-share dividend rise to 4cps.

Mr Foster said industrial growth was driven by an improvement across all applications and markets, particularly  water and waste. Growth in the agricultural division was driven by international markets. New Zealand was solid after a very strong fourth quarter in 2017.

"Skellerup has generated good operating leverage in the first half with profit margins improving for both divisions. Ebit margins improved from 11.4% to 13.6% for the industrial division and 20.4% to 22.1% for the agri division."

Skellerup cited improve costs structures as the key driver for the improved margins, particularly for the industrial division, Mr Foster said.

Skellerup chairwoman Liz Coutts said in a statement the improvement in revenue and earnings could be attributed to the reshaping of operations around the world, continuous and efficient product development and reducing exposure to industries affected by commodity cycles.

"It is extremely encouraging our growth is broad-based and continuing to gather momentum."

Chief executive David Mair said Skellerup  continued to build its position with key original equipment manufacturers.

"This has led not only to growth in our share of their business but also opportunities for new product development. At the same time, we have better aligned our development processes to ensure we are completing new product designs in less time."

At the company’s agri division, ebit rose to $9.5million from $8.4million as revenue lifted 18% to $43.1million.

"This growth reflects our continued success in developing innovative and high-quality dairy components and specialist footwear designed and manufactured to meet the specific needs of customers," Mr Mair said.

"As our home market, New Zealand remains hugely important to us, but increasingly opportunities for growth are to be found overseas."

Skellerup provided 2018 guidance for the first time with its reported profit expected to be between $24.5million and $26million, reflecting the 14% growth based on the midpoint.

Mr Foster said his forecast was $24.7million.

Dividends would be partially imputed in the future, earning partial imputation of about 60% compared to 100% now.

The change in mix of domestic versus international revenues had not been as marked previously. Fully imputed dividends in recent years had been assisted by an imputation credit balance which had now wound down, he said.

Skellerup Holdings shares rose 9c to $1.89 yesterday.

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