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Skellerup doubles annual profit on quake payout

Skellerup doubles annual profit on Christchurch earthquake insurance payout

By Tina Morrison

Aug. 21 (BusinessDesk) - Skellerup Holdings, the industrial rubber goods maker, more than doubled annual profit following an insurance payout from the Canterbury earthquakes.

The Auckland-based company said profit rose to $41.1 million in the year ended June 30, from $19 million the year earlier. Profit in the latest year includes a $20.4 million gain from the insurance claim, some of which will be used to fund a future relocation, and a $1.6 million charge to settle a claim for faulty seals. Revenue rose 4 percent to $196.6 million.

Skellerup said excluding costs and income related to the Canterbury earthquake, annual profit increased 9 percent. Earnings before interest and tax at is Agri unit rose 9.8 percent to $21.7 million on an 11 percent gain in revenue to $80.2 million as it benefited from increased sales of dairy rubberware to farmers.

Returns from investment in its industrial unit were slower than forecast, with Ebit of $13..6 million on sales of $116.2 million, both flat on the year earlier.

In the Agri unit, "we have benefited from a buoyant New Zealand dairy sector leading to increased sales of liners and tubing, increased sales from an expanded footwear range plus a contribution from the acquisition of two small businesses to augment our animal hygiene product offering," chief executive David Mair said in a statement. The Agri unit expects to benefit from regulatory change in Europe which will see larger, more efficient dairy operations replace smaller ones, and from a move to strengthen food safety standards in China.

"These trends will help offset the impact of any drop in farm returns in New Zealand, which if sustained will inevitably lower demand for dairy shed consumables," he said.

The industrial business, which manufactures and distributes technical polymer products for construction, infrastructure, automotive, mining and other industrial customers, is investing in the US on optimism about future sales growth.

"Good progress was made in our industrial division albeit with improvements in returns accruing at a pace slower than what we would like," Mair said. "We are confident by investing now, earnings growth will follow, also aided by our competitive manufacturing bases in Vietnam and China."

Shares in Skellerup dropped 4.8 percent to $1.59, taking their decline this year to 3.5 percent. The stock is rated an average 'hold', according to analyst recommendations compiled by Reuters.

Skellerup said an increase in the New Zealand dollar against the Australian dollar over the past year had crimped earnings as more than a quarter of sales are earned in Australia. The kiwi has appreciated about 9.6 percent against the Aussie over the financial year.

The company will pay a final dividend of 5 cents a share on Oct. 16, taking the annual payout to 8.5 cents, from 8 cents a year earlier.


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