The falling Australian dollar has impacted Schaffer Corporation's bottom line with the industrial company today reporting a 42 per cent drop in its interim net profit.

For the six months to the end of December 2008, Schaffer recorded a net profit of $3.4 million, down from the previous corresponding period's $5.8 million.

The company said the interim profit result includes a $5 million foreign exchange loss, compared to the previous year's $600,000 gain.

A record revenue of $37.9 million and earnings before interest and tax of $5.7 million from Schaffer's building materials division was partly offset by losses in the automotive leather and property divisions.

"Trading conditions in [Schaffer's] primary markets of automotive leather and commercial and residential property have been extremely difficult," the company said in its report.

"These conditions have been exacerbated by the sharpest devaluation of the Australian dollar since the currency was floated in 1983."

The Australian dollar was trading at US63.72 cents at noon today.

The automotive leather division recorded a 19 per cent fall in revenue to $44.2 million, while EBIT plummeted 71 per cent to $1.1 million.

Revenue for the property division fell 11 per cent to $3.1 million while EBIT dropped 52 per cent to $1.5 million.

Overall revenue reached $85.5 million, down from $91.1 million, while EBIT fell 24 per cent to $10.4 million.

The company has maintained its fully franked interim dividend of 25 cents.



The announcement is below:



Schaffer Corporation Limited (ASX: SFC) today announced a headline net profit after
tax (NPAT) of $3.4 million for the first half of the 2009 financial year. The Board of
Directors has declared an interim ordinary dividend of $0.25 per share (fully franked),
payable on 25 March 2009, in line with last year.

The Building Materials division achieved record revenue and EBIT results for the half
year, driven by a stellar performance from pre-cast and pre-stressed concrete
manufacturer Delta Corporation. Not unexpectedly this result has not been matched by
the other two divisions, Automotive Leather and Property.
As noted in the Chairman's address to shareholders at the Annual General Meeting,
Automotive Leather division earnings were negatively impacted by foreign exchange
losses as a result of the significant devaluation of the Australian dollar relative to our
major trading currencies (the US dollar and Euro). The foreign exchange losses were
principally incurred on the purchase of imported raw materials and pre-existing foreign
currency hedge contracts.

Group revenue declined 6% over the previous corresponding period (pcp). Higher
revenues at Delta Corporation were more than offset by the global weakening in motor
vehicles sales, lower sales of paving and walling products and the absence of property
sales. The decline in NPAT over the prior corresponding period is partly due to last
year's NPAT benefiting from a one-off $1.0 million profit from the sale of an investment
property, and a $0.5 million profit on the sale of residential land at Mindarie Keys in
Western Australia.
Trading conditions in SFC's primary markets of automotive leather and commercial and
residential property have been extremely difficult. These conditions have been
exacerbated by the sharpest devaluation of the Australian dollar since the currency was
floated in 1983.
While SFC cannot influence the global automobile market, neither can it control
exchange rates, senior management responded quickly to these realities and
implemented continuing cost reduction initiatives across both operating divisions and
head office. A renewed emphasis on reducing working capital requirements is expected
to deliver additional cost savings in the second half, and an improvement in operating
cash flow.
SFC focuses on matching cost structure within all operating divisions with demand for
our products. SFC also works to maximise efficiency at all its manufacturing plants.
Since 2007, SFC has invested approximately $11 million in additional capital in its
manufacturing plants. That capital expenditure has principally been aimed at improving
efficiency and lowering operating costs. During the second half of financial year 2009,
SFC will begin commissioning a new masonry plant at its Jandakot facility. The new
plant will expand the group's range of products and replace a separate, smaller and less
efficient manufacturing site. That site has been closed as part of the integration of the
Limestone Resources and Archistone acquisitions.
Building Materials reported revenue of $37.9 million (pcp: $33.0 million) and earnings
before interest and taxes (EBIT) of $5.7 million (pcp: $5.1 million).
Delta Corporation's excellent performance was driven by a number of major
construction contracts. However conditions in the Building Products group, which
includes Urbanstone Central, Archistone and Limestone Resources, remained difficult.
A decline in new home start and a significant weakening in the commercial property
construction market were key factors.
The operational integration of recent acquisitions is largely complete. That integration
has created opportunities for greater economies of scale in manufacturing, marketing,
distribution and administration, as well as improved working capital management.

The Automotive Leather division reported revenue of $44.2 million (pcp: $54.3 million)
and EBIT of $1.1 million (pcp: $3.8 million).
Global motor vehicles sales declined sharply during the second half of calendar 2008.
Accordingly, a significant decrease in demand for automotive leather products has
occurred. The depreciation in the Australian dollar against the US dollar and Euro
resulted in net foreign exchanges losses of $7.1 million ($3.4m unrealised) primarily on
pre-existing hedge contracts and foreign currency payables for imported raw materials.
SFC has implemented cost reduction initiatives at its Thomastown, Victoria finishing
plant, and its three overseas cutting plants to keep operating costs in line with expected
future demand.
The Property division reported revenue of $3.1 million (pcp: $3.5 million) and EBIT of
$1.5 million (pcp: $3.1 million).
The pcp included revenue of $1.0 million and EBIT of $2.0 million, associated with the
sale of an investment property in Melbourne, and residential land sales at the Mindarie
Keys development. During the period under review, SFC had no investment property
disposals and no land was sold at Mindarie Keys. As shareholders are aware Mindarie
Keys is now substantially complete with just 15 of 239 residential lots left to be sold at
the Wharf.
Net rental income of $1.5 million increased by 30% (pcp: $1.1 million) reflecting recent
rent reviews. At 31 December average occupancy across all investment properties was
SFC is currently exposed to a climate of economic uncertainty, unprecedented currency
volatility of the AUD and the likelihood of an extended significant reduction in global
automobile manufacturing capacity. As a result, it remains extremely difficult to predict
future financial performance.
SFC anticipates difficult trading conditions across the Building Materials division and
notes that Delta Corporation will complete certain construction projects during the
second half. Consequently earnings for Building Materials are expected to decline
during the second half.
With the depreciation of the Australian dollar, operating margins for the Automotive
Leather division are expected to be materially higher in the second half. At current
exchange rates and anticipated sales volumes, SFC expects EBIT for the Automotive
Leather division to be materially higher in the second half.
SFC expects net rental income for the second half to be higher because of lower
interest rates, and the impact of recent rent reviews. SFC notes the increased risk of
higher vacancy rates. The Board continues to consider options to sell investment
properties where such sales would generate an adequate return to shareholders. At
present, there are no specific investment property disposals under consideration.