Skellerup, most likely known as the maker of the Red band Gumboots, reported its annual result this week which was up +40% on last year and ahead of guidance. More impressively is how Skellerup has been able to achieve these improvements in profitability in both the Agri and Industrial sectors as well as pay down significant amounts of debt.
During the year the Industrial division improved revenues by $8.8m while EBIT improved $6.3m, overall the Industrial division posted 16% EBIT margins far exceeding the previous years’ 12%. This improvement can be attributed to efficiency gains in the manufacturing process as well as focusing on meeting client needs with more proprietary products.
Another interesting point from Skellerup’s result is that they were willing to give guidance for 11% profit growth for 2012 even with the level of economic uncertainty manufacturing companies are facing. This shows the faith the management have in the foundation and operational leverage in the business.
Skellerup is trading at less than 10x next year’s earnings and management has demonstrated that they’re able to deliver results, which is encouraging for the future. Skellerup is a quality New Zealand company that is in a good position regardless of what the economic tides bring.
Sam Gibb
Disclosure of Interest: Milford is a shareholder of Skellerup