Schaffer profit slides as costs rise

Industrial group Schaffer Corporation has nearly halved its net profit to $3.5 million for the financial year, on the back of higher costs.

Chairman John Schaffer said while the group’s second-half profit was up on the previous year, the full-year result was substantially lower.

“The first half of last year benefited from favourable exchange conditions, which also led to several million dollars of abnormal stock profits,” he said.

“This year was the reverse. Hide costs increased in US dollar terms and the exchange rate made our Australian dollar costs higher.”

Along with a 43 per cent fall in net profit, the company posted a 4 per cent slide in revenue to $157.3 million but maintained a total dividend of 25 cents per share, fully franked.

Mr Schaffer said the result was amplified by two factors.

“Firstly, the stock build up necessary to service the projected increases in demand from approved programs that will start flowing in the current financial year, and secondly, the extra costs of starting up new programs,” he said.

However, Mr Schaffer said the company expected volumes at its Automotive Leather business to increase during the year, with profit to increase in 2017, pending foreign currency movements.

“Order books at Building Materials are higher than this time last year and there is a growing number of current and prospective projects here in WA,” he said.

“Within property, we have a current offer to purchase our 20 per cent share in the syndicate property at 616 St Kilda Road. Whilst the offer is not unconditional, negotiations are quite advanced, and when completed should realise a profit of around $4 million to be included in the results of the 2016 financial year.”

Mr Schaffer said underlying performance in the group for the first half of the current financial year is expected to deliver a similar result to the previous year.

Shares in Schaffer were unchanged at $4.80 at the close.