Skellerup profit falls 10%; trade war dents US demand

Skellerup's industrial division makes components, seals and systems for a wide range of automotive, industrial, mining, pipe, valve and medical applications.

Skellerup Holdings reported a 10 percent decline in first-half profit as the US-China trade war dulled demand for its rubber industrial components.

Net profit fell to $12.1 million in the six months ended Dec. 31, from $13.4 million a year earlier. Revenue edged up 2 percent to $122.9 million, while earnings before interest and tax fell 7 percent to $18 million.

That was short of Forsyth Barr analyst Guy Hooper's forecast for ebit of $19.9 million on revenue of $125.9 million.

The weaker earnings came from Skellerup's industrial division, which the company said was hit by the impact of increased tariffs slowing demand for its products in the water infrastructure and oil & gas industries.

The tit-for-tat tariffs imposed by the US and Chinese regimes have crimped investment demand among energy firms, which Skellerup said compounded a reduction in oil and gas exploration and a slowdown US infrastructure markets.

Skellerup's industrial division makes components, seals and systems for a wide range of automotive, industrial, mining, pipe, valve and medical applications. Its ebit fell 15 percent to $9.9 million.

The Auckland-based company said it was able to partially mitigate the impact of tariffs with cost reductions and increased earnings from other products.

Skellerup's agriculture division – which produces items such as dairy liners and rubber footwear for farmers – lifted ebit 5 percent to $10.1 million.

It said that growth was underpinned by US farmers, whose returns improved after a difficult period of high feed costs and low milk prices.

Chief executive David Mair said the recently acquired silicon business Silclear will boost earnings in the second half of the 2020 financial year.

Skellerup shares fell 3 percent to $2.27 in early trading.

The board declared an interim dividend of 5.5 cents per share, unchanged from a year earlier. The dividend will be paid on March 9 to shareholders registered on March 6.

"We have confidence in our strategy of working closely with key customers to develop products that deliver value and sustainable earnings growth," chair Liz Coutts said.