Scott Technology first-half profit drops 63% as strong kiwi erodes export earnings
March 28 (BusinessDesk) - Scott Technology, the industrial automation firm, reported a 63 percent slump in first-half profit as a strong New Zealand dollar eroded the company’s export earnings and stiff competition pushed down margins.
Net profit dropped to $820,000, or 1.3 cents per share, in the six months ended Feb. 28, from $2.2 million, or 6.2 cents, a year earlier, the Dunedin-based company said in a statement. Revenue declined 5.7 percent to $25.3 million. It expensed $900,000 on research and development in the half.
“Underlying activity and sales across the entire business were at strong levels, but due to the effect of the high New Zealand dollar and the competition to win project work, margins were lower than historical levels,” the company said. “The directors are aware of the difficulties of the current economic environment, but are confident that the initiatives we have in place and have planned will deliver the required results for all stakeholders.”
Last month, Scott Technology said a global mining slowdown and a high New Zealand dollar were squeezing its margins in the short term, and it was reviewing its operations to mitigate the currency impact.
Scott Technology evaluated several potential acquisitions in the period, but rejected many which didn’t meet the company’s criteria, while others are still under consideration, it said.
“The company sees the need to grow in order to achieve scale within the business and to enable the ongoing development of our people,” it said.
The board declared an interim dividend of 2.5 cents per share, fully imputed, and payable on May 6.
The shares were unchanged at $1.55, and have dropped 18 percent this year.
Scott Technology’s standard equipment unit reported a 43 percent slump in revenue to $8.2 million, while segment profit more than halved to $1.67 million. Its automated equipment unit boosted sales 38 percent to $17.1 million, while segment profit soared to $855,000 from $27,000 a year earlier.