KEY POINTS:
Profits at gumboot-maker Skellerup Holdings have taken a kicking from the strong dollar and the company is not expecting to recover this year.
Net profit for the six months ending December 31 was $4.8 million, down from $5.9 million the previous year, with revenue rising from $68.1 million to $93.7 million.
Chairman Keith Smith said the fall in net profit was mainly attributable to a higher exchange rate, which had a $2.3 million negative impact on the net profit result.
US dollar exports were converted at between US65c and US71c, compared to US50c in the previous comparable period, Smith said.
Managing director Donald Stewart said slower trading conditions were expected to continue as the dollar and interest rates remained high.
Full-year net profit was expected to be between $10.5 million and $11.5 million, down from $13.4 million the previous year. Trading profit - earnings before interest, tax, depreciation and amortisation - was up 9 per cent at $14 million, although operating results were below expectations, Stewart said.
"Now that the China factory is fully operational, we are looking to expand capacity to meet increasing demand for the current product range and for new products.
"Gulf Rubber is investigating opportunities to expand its manufacturing capability into the European market to better take advantage of their growth opportunities."
Gulf Rubber - bought last year for $32 million - had traded above budget with strong export growth into Europe and the US, Stewart said.
"Encouragingly as a group our other recent acquisitions have also contributed ahead of their prior period performance."
To minimise the risk from exchange rates the rubber products maker had moved to hedge its net US dollar exposure at US68c.
Shares closed down 1c yesterday at $1.32.
Forsyth Barr analyst John Cairns said Gulf Rubber performing ahead of expectation was positive.
"On the negative side they are saying that trading conditions particularly domestically are slow and in respect of the exchange rate well it's just something that they have to work through. I guess it's just the issue of manufacturing in New Zealand."
