Skellerup first half profit dips as inflation, tax, bites

Skellerup still expects to make a full year net profit of about $50m. Photo / Supplied

Skellerup’s net profit dropped by 1 per cent in the first half to $23 million due to higher interest and tax costs, the listed manufacturer said.

The company’s earnings before interest and tax (ebit) for the six months were $33.5m - up 3 per cent and a record.

Revenue came to $165.5m, up 10 per cent on the prior comparative period.

Skellerup designs and makes components and products used in a range of everyday applications that must often meet stringent food, drinking water, hygiene and safety standards.

It also makes a popular New Zealand brand of gumboot.

Skellerup’s industrial division posted ebit of $21.4m, up 14 per cent.

The agri division’s ebit came to $14.6m, down 12 per cent.

Skellerup declared an interim dividend of 8 cents per share - an increase of 0.5 cps - or 7 per cent.

The company has kept its guidance for the full year to June 30 for a net profit of $48m to $52m.

Chief executive David Mair said it had been a tough environment over the six months.

“The rapid increase of inflation and general slowdown in demand is a different challenge to what we faced 12 months ago,” he said.

“Some of our businesses have capitalised on the investment they have made to increase sales and returns whilst others have had to adjust to slower demand,” he said.

“All have had to deal with increased costs which we have largely recovered via productivity gains or adjusting prices, reflecting the value of our products,” Mair said.

New Zealand’s consumer price inflation ran at 7.2 per cent over the 2022 calendar year.

Mair said that markets were mixed, and seasonal demand impacted the result.

“In Europe our businesses have faced significant increases in energy costs and a slump in the purchasing power of the euro,” he said.

“However, the increase in energy costs has spurred demand for some of our products used in solar applications.

“Globally the rising costs and lower level of construction activity has impacted both directly and indirectly, but the diversity and quality of our businesses has seen growth in demand in other sectors.”

On the industrial division, Mair said strong revenue and earnings growth from foam and vacuum systems businesses were the first half’s highlight.

On the agri business, he said dairy sales were softer, as expected, and in line with budget following a very strong finish to the prior year.

“This lower demand naturally impacted production and some erosion of gross profit in the first half of the year,” he said.

Footwear sales into the New Zealand and the US markets remained strong, exceeding both Skellerup’s target and the previous comparative period.

Skellerup’s balance sheet remained strong, with debt running at 19 per cent of its net assets.

Shares in Skellerup last traded at $5.36, down 9c or 1.65 per cent on Wednesday’s close.