Shareholders were told Skellerup planned to spend about $40 million on the dairy rubberware development and manufacturing facility, the company’s biggest-ever capital project.
Managing director David Mair was willing to discuss this development, but he wouldn’t elaborate before the end of the financial year, on June 30, on two downward revisions since January to Skellerup’s profit expectations.
“All I can say is the big thing we are focused on is building a future for the Agri division through Project Viking in Christchurch and that’s taking a lot of time and energy,” he said.
The building was complete and staff would move in over the next nine to 12 months. Dairy products accounted for 10% of revenue of $203m in 2014-15, when Skellerup’s annual net profit after tax was $21.9m.
At the annual meeting shareholders were told the profit was expected to rise to $24-$26m in 2015-16 as the company focused on growing international markets and innovation to offset a decline in dairy and iron ore prices.
New liners made from silicon, which last longer than the traditional black rubber, and improved milking filters were mentioned among the dairy product innovations.
But in February Skellerup reported net profit after tax had slipped 1% to $9.6m in the December half-year, despite revenue rising 9% to $107.6m compared with half-year results the previous year. Annual profit expectations were trimmed to about $23m. One factor was slower local sales of dairy rubberware and footwear as cash-strapped farmers deferred their spending.
In April the company further reduced its profit forecast to $20-$21m.
Mair said NZ farmers’ spending on dairy consumables usually peaked in May-August, but he expected this year’s peak to be smaller and later. International sales were being adversely affected as the newly deregulated European market increased milk production and lowered prices in key markets.
Founded by George Skellerup in Christchurch in 1910 as the Para Rubber Company and best known for its Red Band gumboots, the company is now headquartered in Auckland.
Its Agri division is the world’s second-largest provider of rubber products including rubber dairy liners and tubing for taking milk from cows in the milking shed into stainless steel vats, and animal health products. The Industrial Division supplies polymer products for a range of industries in more than 30 countries.
Exports in the December half-year accounted for 79% of revenue, up from 76% a year earlier. Continued targeting has made the United States the company’s biggest market, up from 25% of sales to 27%. The European share edged from 19% to 20%, because of strong sales of dairy liners and tubing. Australia accounts for 25% of sales.
