Schaffer Corp reports 6% lift in profit

20/08/2008 - 11:03

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The falling Australian dollar could play out nicely for industrial company Schaffer Corporation Ltd which posted a six per cent increase in net profit to $11 million for the 2008 financial year.

The falling Australian dollar could play out nicely for industrial company Schaffer Corporation Ltd which posted a six per cent increase in net profit to $11 million for the 2008 financial year.

The West Perth-based company today said strong performances from its building materials and automotive leather divisions were the primary drivers of the net profit lift.

Revenue for the leather division increased by 42 per cent to $120 million while earnings before interest and tax jumped 49 per cent to $8.9 million.

Over the year, Schaffer realigned the leather division's production facilities, with the establishment of plants in China, Mexico and Slovakia, and reset the division's cost base.

"As a result, despite difficult conditions across the global automotive industry, Leather generated a second year of strong earnings growth," Schaffer said.

"The division achieved that growth despite the ongoing appreciation of the Australian dollar against the US dollar and the Euro during the 2008 financial year.

"More recently, the Australian dollar has declined against both other currencies, which if sustained should positively impact the division's earnings going forward."

The leather division supplies materials to Volkswagen, Ford and General Motors.

Meanwhile Schaffer's building materials arm reported a 19 per cent increase in revenue to $65.6 million.

However earnings before interest and tax dropped 19 per cent to $8.7 million with revenue offset by integration costs and difficult trading conditions, including a weaker WA housing market.

Schaffer's property division reported a 75 per cent increase in EBIT of $6.6 million following the sale of assets in Perth and Melbourne, and a lift in net rental income from joint ventures across WA.

Currently, the company's property interests are valued at $117.6 million.

Overall, Schaffer achieved revenue of $196 million, up 33 per cent from the previous year while EBIT reached $22.1 million, up 15 per cent.

Earnings per share was at 77 cents, up five per cent from the previous year.

Looking ahead, chairman John Schaffer said that while each of the divisions performed well, there was potential for the current volatile market conditions to have a potential impact on revenue and earnings in the 2009 financial year.

"Trading conditions remain challenging in many industries serviced by SFC and the impact of the ongoing global credit crisis on the group is difficult to assess," Mr Schaffer said.

"Potential exists for each of the Australian construction and property markets and the global automotive industries to be adversely affected.

"As a result of the strategic decisions the Board made to re-position some activities and expand others, the Board expects to maintain ordinary dividends of $0.50 per share (fully franked) in the current year."

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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