Skellerup Holdings advise earnings reduction

5 June 2007

Skellerup Holdings (Skellerup) advise earnings reduction and business restructure with future focus being growth opportunities in technical polymers internationally.

As a result of recently experienced slower trading conditions and the continuing strength of the NZ Dollar, Skellerup is now expecting to report a reduced Net Profit after Tax (NPAT) before abnormals (as detailed below) of approx $9.0m for the year ending 30 June 2007 (2006: $13.4m).

The 2007 result includes a currency impact of approximately $4.7 million on NPAT between the 2006 and 2007 years.

Following an extensive review of Skellerup’s business mix and future growth opportunities, the Board has determined to specialise as a global technical polymers (mostly rubber) company.

The consequence of focusing on growth opportunities for technical products, will be the sale of some operations.
The Chairman Keith Smith said “We understand the technical rubber industry well. It is the heart of Skellerup today.The market is large internationally, but quite fragmented, and thus Skellerup expects to continue to grow by acquisition to build a stronger presence in the larger, higher growth and more valuable markets”.

Given the volatility and current strength of the NZ Dollar Skellerup intends to further develop its already extensive outsourcing of industrial products for the New Zealand market.
This trend is expected to have its greatest impact on Skellerup’s Christchurch factory through a reduction in non-dairy related activities, with the possibility of consequential redundancies.

Impact on earnings

The impact on earnings due to the proposed restructuring is estimated at $16m, including $10m in non cash asset writedowns. As a consequence, the group expects to report a net loss of approximately $7m for the year ending 30 June 2007, after the $16m of restructuring costs.

At this point in time it is anticipated that the Company will post a net profit of approximately $12.5m in the 2008 year.

“The changes adopted by the Board arise from an extensive review of the shape of the business. They will result in a more focused operating portfolio that better reflects the group’s core competencies, the shift in international markets and industrial trends,” Mr Smith said. “We are confident that these changes will reposition the group for more significant growth opportunities in the future”.

Skellerup Holdings Limited is a New Zealand based marketer, manufacturer and distributor of specialised rubber and foam products, footwear and vacuum pumps to agricultural and industrial customers worldwide. The Group is listed on New Zealand Exchange under the trading code SKL.

ENDS

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