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Skellmax Confirms Strong Year

Tuesday 3 September 2002.

‘Skellmax Confirms Strong Year’

Skellmax Industries Ltd, the specialist manufacturing and distribution company, that successfully listed on the New Zealand Stock Exchange on 19 June 2002, issuing 100 million shares to approximately 7000 shareholders, has confirmed that it achieved a strong performance from all group activities in the 30 June 2002 year.

“Our results on a full twelve months basis demonstrate that Skellmax is soundly based and trading well,” says the chairman, Mr Keith Smith. “The strengths of our two core businesses, Skellerup and Flomax during the period, are fully reflected in the strong performance.”

The initial trading period for reporting purposes covers only the nine business days between 18 June 2002, the date of acquisition of the businesses forming Skellmax Industries Ltd, and the end of the financial year at 30 June 2002. Earnings in that brief period have been disclosed in the company’s preliminary announcement to the Stock Exchange in accordance with financial reporting requirements. However, more meaningful for shareholders is the annualised performance.

“The directors are pleased to advise that earnings before interest and tax (EBIT) for the twelve months ended 30 June 2002 was $19.21m which represents an increase of approximately $3m, or 19%, on the pro-forma result of the combined businesses for the year ended 30 June 2001.”

“We are also able to confirm that Skellmax Industries has delivered on the prospectus forecast of $18.9m and actually improved on that by $312,000 or 1.7%.”

Skellmax Industries lifted its audited net profit after tax to $12.842m, which is 1% ahead of the prospectus forecast of $12.713m. Of this $12.465m is pre-acquisition profit attributable to Viking Pacific Holdings Ltd.

The balance sheet shows total assets at $64.55m, which is approximately $1.46m lower than the forecast. Total Liabilities stand at $46.83m of which current liabilities stand at $16.83m and borrowings at $30m (being the loan facility applied to partly fund the acquisition of Skellerup and Flomax from Viking Pacific). Net assets stand at $17.73m

Cash Flow from operating activities for the full year at $14.78m was ahead of forecast by some $1.93m, resulting in an improved cash-on-hand position as at 30 June 2002.

Directors note that due to Viking Pacific retaining ownership of Skellerup and Flomax for all but two weeks of the financial year ended 30 June 2002, no dividend will be paid in 2002 in respect of that year. In the absence of unforseen circumstances, it is still the intention of Directors to commence paying Dividends from April 2003 at the levels stated in the Prospectus.

As set out in the prospectus it is the directors’ intention to establish an Employee Share Scheme (known as a DF7 scheme). As soon as Inland Revenue approval is received the directors will proceed to issue two million shares to the Scheme.

“September 11 2001 had a significant negative impact on the world and the major economies have been slower to recover than earlier expected with global markets continuing to be volatile throughout this year,” says Mr Smith. “There has also been considerable commentary about US corporate governance issues which has further unsettled markets generally.”

“In the domestic market, general trading conditions have been affected by the strengthening of the New Zealand exchange rate against both the Australian and US dollars and the apparent peaking of the current rural economic cycle.” Mr Smith adds. “Not withstanding all these unsettling factors, Skellmax Industries has continued to perform well.”

The managing director, Mr Donald Stewart states, “There has been a smooth transition from Viking Pacific ownership to that of Skellmax Industries. This was expected, as the core businesses, Skellerup and Flomax, have been sister companies under previous management structures since 1985. In bringing these two well-known and strongly performing manufacturing and distribution businesses together within Skellmax, we have maintained their separate identities whilst gaining the efficiency benefits of a more focused group structure.”

“In summary, we have successfully integrated the two core companies and their business units into one cohesive organisation,” says Mr Stewart.

“We are operating in a challenging market but Skellmax’s manufacturing processes are able to quickly respond to changing circumstances by managing lead times, length of manufacturing run and the length of the product cycle. We are meeting our objective of satisfying customers’ needs by providing high quality products at a competitive price.”

“The diversified range of activities within the group helps to insulate Skellmax from cyclical fluctuations. Skellmax combines Skellerup’s strength in manufacturing and distribution of rubber, polyethylene and foam products with Flomax’s strength in the manufacture and distribution of vacuum pumps and accessories.”

“A strong market position continues to provide a solid foundation for Skellerup where the three business divisions, Agri, Industrial and Ultralon, have all performed strongly in the June 2002 year.”

“Skellerup’s Agri division sells essential dairy rubberware and other rural related products to the domestic and international agri markets. This division is unlikely to be affected by the prospect of lower payouts by NZ dairy companies in the current year due to the consumable nature of the dairy product range and the fact that approx 50% of its dairy related revenues are derived from overseas markets. We continue to attract new business, evidenced by a recent substantial new export order for milking machine liners. This will result in a 10% volume increase in the production of liners.”

“The Skellerup Industrial division services a wide range of industrial end-users in Australasia and the Asia and Pacific Region. The Industrial division was well ahead of its 2001 performance and is looking to Australia for significant growth this year. We are having continuing success with trialling additional products for the Australian mining industry.”

Ultralon continues to be well positioned in the marine, industrial and leisure industries throughout Australasia and internationally.

“Flomax has enjoyed an excellent year. With its cost competitive manufacturing, established customer/ distribution network, and its “brand” strength in the Industrial market Flomax has further significant growth prospects in the medium to longer term.”

“The Flomax dairy division is looking to consolidate its position as a world leader in the manufacture of dairy vacuum pumps. Whilst the current domestic dairy market appears to be reasonably demanding, there are a number of opportunities offshore that will counter this.”

“The Flomax Industrial division is well positioned, in its core US market, as the leading manufacturer/distributor of rotary vane vacuum pumps for installation on liquid waste removal trucks. The recent acquisition of the Flomax blower product offers real growth prospects for Skellmax. There are numerous industrial applications for this technology and significant global demand to be tapped.”

“Two months into the new financial year both Skellerup and Flomax are performing to expectation and we are confident that the group is on target to achieve the EBIT forecast of $20.77m, as set out in the prospectus.”

For Further Information Please Contact:

Mr Donald Stewart
Managing Director
Skellmax Industries Ltd
Tel (09) 571-5899
Fax (09) 571-5896
Mobile: 021 359-223

Or Mr Warren Head
Managing Director,
Head Consultants Ltd
Mobile (025) 340-650

About Skellmax Industries Limited.

Skellmax Industries is an international business with operations in New Zealand, Australian and the United States. It comprises two core businesses:

(i) Skellerup, a marketing, sales, manufacturing and distribution business servicing the dairy rubber, industrial rubber and rural supplies markets. It also supplies rotomoulded polyethylene tanks and containers to rural and industrial markets. It is the 3rd largest manufacturer of dairy rubberware worldwide and the largest manufacturer in that sector in New Zealand. The industrial business unit distributes and manufactures specialised rubber materials and related products for industrial and building end uses such as conveyor belts, waterproofing membranes, rubber extrusions and mouldings, latex products and roofing materials.

(ii) Flomax a manufacturer and distributor of vacuum pumps and associated equipment. It manufactures rotary vane and liquid rung vacuum pumps for the dairy milking machine markets as well as for industrial markets including liquid waste, portable toilet, de-watering and oil field sectors. Flomax is a world-leading manufacturer of dairy vacuum pumps principally for international OEMs. The Flomax industrial unit is focussed on the US market where the Masport brand and distribution network sets Flomax apart from its competitors.

During 2001 Flomax acquired the technology and manufacturing assets of a Canadian-based manufacturer of blower pumps that are used extensively in a diverse range of industries including the truck-mounted pneumatic conveying and materials handling sectors.

Skellmax Industries Ltd has a board of six: Keith Smith (Chairman); Arthur Young (Deputy Chairman); Donald Stewart (Managing Director); Elizabeth Coutts; Leigh Davis and Graham Fraser.

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