Friday, March 29, 2024

Skellerup shares jump

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Skellerup shares jumped as much as 2.1% after it upgraded its earnings guidance for a second time this financial year.
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The shares rose as high as $4.44, up 9 cents, up from $1.90 a year ago, although down from their record $4.65 in March.

The company now expects net profit for the year ending June to come in between $37 million and $39m. That’s up from its February guidance of $33m and $37m, and from its guidance in October last year of $30m-to-$35m. 

Even $30m would be a record result, bettering the $29.1m it earned in the year ended June 2020.

Chief executive David Mair says all businesses have continued to perform well.

“Sales of potable water products in the US and demand for our flashing and plumbing products in all markets were robust in quarter three,” Mair said, adding that he’s expecting continued solid demand in the fourth quarter.

“Sales of essential dairy consumable products were also better than expected during what is a normally seasonal low period.”

Because we are heading into the peak part of the New Zealand season when dairy farmers usually undertake maintenance, Mair expects a strong fourth-quarter result.

“Demand for our high-performance marine foam products continues to grow in all markets. Our order book remains strong, particularly in the US,” he said.

However, not everything is rosy.

“The global shortage of containers and shipping space, along with international port congestion, is impacting our business,” he said.

The company is focused on delivering the essential products it supplies throughout the world and its manufacturing teams are focused on securing raw materials and running operations as efficiently as possible to meet customer requirements.

Mair says the company has been grappling with covid-related supply chain disruption for quite some time but it does make forecasting tricky, because of the potential for delivery times to slip.

Among the ways Skellerup has been dealing with the problem has been by shipping less-than-container-loads more often, although this does mean higher shipping costs, and collaborating with other exporters to consolidate containers.

But the company is “quite a distributed business”, meaning it isn’t shipping from a single export base in NZ.

While the company is best known for its gumboots – which it still makes – most of its products are rubber or silicone-based and are used in either the milking process or in industrial applications such as plumbing and other water management applications.

The company’s first-half results released in February demonstrated a sharp improvement in profit margins in both divisions.

The agri division’s earnings before interest and tax (Ebitda) margin have been fluctuating between 22% of revenue and 23% in the first-half years since 2017 but jumped to 30% in the six months ended December.

The industrial division’s margins have been somewhat more volatile, ranging from 11.8% in the first-half of 2017 and 15% in the first-half of 2019, but they reached 18.2% in the first-half of 2021.

Mair says the changes are broad-based across the company.

It takes time for operational changes to flow through into financial results and it also helps to have tailwinds such as current high dairy prices, he said.

“I think we’re in a strong position. I think we’re offering a far better service to our critical customers, especially in times like this,” he said.

Business Desk

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