Skellerup's shortfall hits shares

Skellerup's Agri unit has benefited from a buoyant dairy sector with more sales of items such as gumboots. Photo / Christine Cornege

Investors react after rubber goods maker's profit comes in below analysts' forecasts

Shares in Skellerup Holdings declined after the industrial rubber goods maker missed analyst estimates for annual profit.

The Auckland-based company said profit excluding Canterbury earthquake insurance payments rose 9 per cent to $20.7 million in the year ended June 30, as revenue lifted 4 per cent to $196.6 million. That lagged expectations for profit of $23.4 million on revenue of $200.8 million, according to the mean estimate of analysts compiled by Reuters.

The company's shares closed down 7c yesterday at $1.60.

Skellerup said earnings before interest and tax (ebit) at its Agri unit rose 9.8 per cent to $21.7 million on an 11 per cent gain in revenue to $80.2 million as it benefited from increased sales of dairy rubberware to farmers.

Skellerup had previously signalled it expected a pickup in its industrial unit, but it said returns from the unit were slower than forecast, with ebit of $13.6 million on sales of $116.2 million.

"We were quite happy with it but this is what happens if it comes in at the lower end of what people were expecting," said Brian Gaynor, who holds the stock among the $700 million in New Zealand equities he helps manage at Milford Asset Management. "Everything is in relation to what people are expecting and obviously some people out there were expecting Skellerup to be slightly better -- it wasn't and so the share price has come off a bit."

Skellerup said total annual profit rose to $41.1 million, from $19 million the year before. Profit in the latest year includes a $20.4 million gain from the Canterbury insurance claim, some of which will be used to fund a future move, and a $1.6 million charge to settle a claim for faulty seals.

The Agri unit had benefited from a buoyant dairy sector leading to more sales of liners and tubing, more sales from a bigger footwear range "plus a contribution from the acquisition of two small businesses to augment our animal hygiene product offering", said chief executive David Mair.

The Agri unit expects to benefit from regulatory change in Europe which will see larger, more efficient dairy operations, and from a move to strengthen food safety standards in China, helping to offset the effects of any fall in New Zealand farm returns.

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

Skellerup said a rise in the kiwi 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 per cent against the aussie over the financial year.

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