Skellerup Holdings' annual profit fell 6 per cent as weaker demand for products in its agricultural business weighed on improved earnings from its industrial unit.
Profit slid to $20.5 million, or 10.65 cents per share, in the 12 months ended June 30, from $21.9m, or 11.38 cents, a year earlier, the Auckland-based company said in a statement. That's within its April forecast for profit of between $20m to $21m. Chairman Selwyn Cushing said earnings are expected to improve in the coming 2017 financial year.
Skellerup's industrial division, which supplies polymer products, increased earnings before interest and tax by 8.7 per cent and the company expects earnings in the unit to continue to improve. However, earnings slid 15 per cent at its agricultural unit, which provides rubber products to the dairy industry, as weak milk prices prompted the postponement of some spending.
"Demand for our milking liners held up well as these are an essential consumable; however demand for tubing and other products was down as farmers are more able to defer expenditure on these items," said chief executive David Mair.
A diverse range of products and markets had helped shield the company from the effect low commodity prices were having on its customers in the dairy, oil and gas, and mining industries, he said.
For the agricultural unit, earnings before interest and tax fell to $18.8m from $22.1m, while revenue slid 1.1 per cent to $79.6m. In the industrial unit, ebit rose to $15.3m from $14m as revenue lifted 7.4 per cent to $132m.
North America edged ahead to become the company's largest market by revenue in the latest year, improving 15 per cent to $57.8m. Australia was the second-largest, up 1.7 per cent to $51.8m, while revenue in New Zealand declined 6.3 per cent to $45.7m. In Europe, revenue advanced 3.4 per cent to $26.6m.
In the past year, the company's management focused on improving its performance to counter the impact of tougher markets, Mair said, noting its operating cash flow increased to $30.9m from $17.8m a year earlier.
"We expect to continue to generate strong cash flow which provides an excellent dividend stream for shareholders and the ability to invest in our business," he said.
Skellerup will pay a final dividend of 5.5 cents per share on October 13, taking the total dividend for the year to 9 cents, unchanged from the year earlier.
Its shares last traded at $1.40 and have declined 7.3 per cent this year.