Skellerup Annual Shareholders Meeting 2019

1

Skellerup Holdings Limited
Annual Shareholders Meeting 09 October 2019
Chair’s Address
Good afternoon and welcome to Skellerup’s Annual Meeting for 2019.
We are pleased to have delivered another record year. Our revenue of $245.8 million was up 2% on
last year which was also a record year. Net profit after tax was $29.1 million, an increase of $1.8
million, and 7% ahead of the record profit also achieved in the prior year. The financial results of
FY19 reflect the robustness of our business model and continued commitment to stay close to our
customers.
The repeated earnings growth of recent years and strong cash flow generation continues to provide
us with a strong balance sheet. This enables us to pay good dividends and provides opportunities for
further investment to grow the Skellerup business.
Our growth plans include acquisitions. We take a prudent approach and only invest where we are
confident the acquisition or investment will deliver profitable growth, broaden and strengthen our
technical capability and create additional market opportunities.
Our acquisition of Nexus Foams at the end of April this year is an example. This is a great fit for our
business, using soft materials, including foam to design and deliver important components for OEM
customers. The acquisition of Nexus expands our reach into healthcare and electronics applications.
Another example is our investment in US based Sim Lim Technic in June 2018. This has provided
Skellerup with internal expertise in the design and manufacture of liquid silicone rubber products.
This technology augments our established capabilities and enables us to grow with existing and new
customers.
Skellerup is a successful New Zealand headquartered business. We are proud of our New Zealand
heritage, and that much of our product development and design is still carried out in New Zealand.
And, today we are an international business. We serve customers across the globe. More than three
quarters of our products are manufactured overseas and over three quarters of our revenue is
generated from international markets. We are pleased to be performing well across all key
geographies and markets.
In November 2018 the improvement in our performance was recognised when we won the Deloitte
Top 200 Award for Most Improved Performance. This award acknowledges our achievements and
the delivery of a proven strategy. We were delighted to be recognised by New Zealand business
leaders.
Building and maintaining a strong understanding of our businesses and markets across the globe is a
priority for management and the Board. Last year, the Board visited our operations in China and this
year we visited Vietnam. These are important and valuable trips for the Board, as we have significant
and long-standing relationships, and by visiting we not only engage with key partners and our local
teams but also gain an insight into the operating environments and growth opportunities available.

2
A key role of the Board is to provide strategic insight to support management to deliver on its
growth plans. This is often summarised as providing oversight, insight and foresight. As a Board, we
are conscious of how important it is to have an appropriate range of skills, depth of experience and
diversity of thought around the Board table to enhance decision making and shareholder value.
Skellerup is fortunate to have a strong and well-balanced Board of Directors. The Board has a mix of
skills covering core strategic, financial and governance experience, as well as experience across local
and international markets and across manufacturing, supply chain and technology. However, we are
looking to add to our Board by appointing a new independent director with operational leadership
experience who understands competitive and global markets.
As I said earlier the Board was pleased with Skellerup’s FY19 results. As a result, we have again
increased the dividend. We will pay a final dividend of 7.5 cents per share on 17 October 2019,
bringing the total FY19 dividend to 13.0 cps up 2.0 cps on the prior year.
On behalf of the Board I would like to thank our diverse team of talented people across our
Skellerup operations. Their expertise, commitment and hard work have paid off with another strong
result for you, our shareholders.
I would also like to thank the Board. They bring a wealth of expertise and experience and their input
is much appreciated.
Finally, I would like to thank you, our shareholders for investing in and supporting Skellerup, and
attending this afternoon. We are building momentum and we look forward to continuing to
generate strong and sustainable returns for shareholders.
I will now hand over to David Mair, our CEO.

---

1

Skellerup Holdings Limited
Annual Shareholders Meeting 09 October 2019
CEO’s Address
Thank you, Liz
We are pleased with last year’s performance. As Liz mentioned this was another record result for
Skellerup – with net profit up 7% on the prior year and 23% on FY17. These are good increases
resulting from both a strong focus on customers; and delivering productivity and efficiency gains
across our operations.
Our strategy is simple: Developing strong and enduring relationships with customers is at the very
heart of our business. We have a strong focus on OEM – or Original Equipment Manufacturer –
customers. We design and develop components and products that form a part of a customer’s final
product. We solve customer problems and help them make more money. That is why we exist.
I encourage you to read carefully our annual report that I believe outlines clearly, why we exist; what
we do and then provides case studies that explain how we do it.
One good example of how we do things is in the growing potable water industry, where our Gulf
Rubber business has developed a new restraining pipe gasket for PVC piping. This required a new
material formulation which would perform for a long period, while also meeting US potable water
standards. This kind of product development could typically take months, but our first prototype was
ready in only 10 weeks.
Another good example is in the dairy industry, where we partnered with ADF Milking to develop a
new milking liner to help prevent issues causing mastitis. This is a major pain point in the dairy
industry costing billions of dollars every year. In just six months we moved from prototype through
four iterations to a final design. These are just two examples of how we respond faster than our
competition.
Our success in FY19 can also be attributed to our ongoing focus on improving productivity and
efficiency. We have key measures and indicators in place to identify improvement opportunities
quickly. These measures include reducing customer lead-times all the way through the production
process to dealing with key suppliers.
This approach has helped us to be more efficient and to eliminate waste within our operations. A
good example is in our Wigram facility where we were able to make process changes reducing the
incidence of product rejects by more than half. This has saved the equivalent of 260,000 saleable
products per year.
We have a firm focus on ensuring health and safety is well embedded into our culture and day-to-
day operations. We believe health and safety is the responsibility of everyone in the business, but in
particular our leaders have embraced the need to lead through their behaviour and communication.
We are pleased to have continued to reduce our injury rate over the past year. Our ultimate aim is of
course zero harm and we are determined to maintain our pattern of improvement and continue to
commit time and expertise to achieve this.

2
Industrial division
The Industrial Division continued a trend of improved financial results for the fourth consecutive
year, delivering record Earnings Before Interest and Tax of $22.9 million.
These are strong results and we are looking forward to further growth across the Industrial Division
in the coming year.
Potable water continues to provide big opportunities. We are working with organisations charged
with both the supply of drinking water and removing and treating wastewater. As the world’s
growing population continues to rely on ageing infrastructure, this will be a key driver for our growth
plans.
During this year, the industrial division has also begun to realise the benefits of our investment in
Sim Lim. We relocated the business into a new facility to ensure it can provide additional capacity to
meet the growth we expect to achieve in the coming years.
We acquired Nexus Foams in May 2019, which designs and manufactures foam products for OEM
customers, particularly in healthcare and electronic applications. The nature of this business and
customer base is a great fit for Skellerup and we look forward to integrating them into our Group.
Agri Division
The Agri Division delivered a robust performance this year, delivering Earnings Before Interest and
Tax of $22.8 million, in line with the record result achieved in FY18.
Skellerup continues to be a global leader in the development of innovative solutions for the dairy
industry and is the second largest manufacturer of dairy rubberware in the world. Our products play
an essential role in protecting milk quality and animal health.
We are proud to also be a leader in New Zealand, which remains an important market for us.
However, we see our greatest growth opportunities coming from international markets.
Alongside our leadership in dairy rubberware, we also develop specialist footwear. Our footwear
products have again performed strongly through 2019. While our Red Band gumboots are a
household name in New Zealand’s rural sector, so are our specialist boots around the world. We
deliver specialty footwear for the fire, forestry, electricity and mining markets. Like all Skellerup
products, these are high-performance items that must meet rigorous standards. Demand for these
products continues to grow.
People
Our people drive the success of our business.
We foster a high-performance, entrepreneurial culture that attracts the best people and empowers
them to succeed. We are proud to have a diverse workforce. For us diversity is much broader than
gender. As an international business, we benefit from diversity of thought, culture and backgrounds.
This is invaluable to the way we operate and innovate.
We are a global team, but highly integrated, allowing us to leverage our expertise and learnings
across markets. This also allows us to capitalise on the benefits of time differences; ensuring our
development timeline operates across what is effectively a 24-hour operation. This highly
collaborative approach is another important differentiator.
We are a team of nearly 800 people, delivering high-end components to customers all around the
world. We value our customers and work hard to stay close to them. This means knowing their
opportunities and their challenges, so that we can respond with new innovations that will make a
difference.

3
We have built a reputation for rapid innovation. Working with our customers to develop new
components and then bring these to market quickly. This focus on speed and precision covers all
aspects of the process, from prototype design to final manufacture. We are renowned for helping
our customers launch new products to the market faster than our competitors.
Closing
In closing, I would like to thank our team of talented people around the world for their contribution
to another record result. Without their expertise, enthusiasm and commitment, we would not be
the innovative and successful company we are today.
I would also like to thank the Board. They bring a wealth of expertise and experience and their input
is much appreciated.
Finally, I would like to thank you, our shareholders, for investing in Skellerup. We look forward to
continuing to deliver profitable growth. We have a sound business model. We are committed to
staying close to our customers and delivering innovative products and services. We believe that this
approach alongside the ongoing investment in our people and our focus on driving efficiency – will
continue to deliver strong returns to our shareholders.

---

1
Annual
Shareholders
Meeting
09 October 2019

2
ASM 09 October 2019
Liz Coutts
Chair Address

3
ASM 09 October 2019
FY19: Record Revenue of $245.8 million and NPAT of $29.1 million
Revenue & NPAT
0
50
100
150
200
250
300
FY15FY16FY17FY18FY19
Revenue NZ$ Million
0
5
10
15
20
25
30
35
FY15FY16FY17FY18FY19
Net Profit after Tax NZ$ Million

4
ASM 09 October 2019
FY19: Gross Dividend of 13 cents per share (allowing for lower imputation represents a 10% net
increase over FY18 and 24% net increase over FY16)
Low Debt, Increasing Dividends
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
FY15FY16FY17FY18FY19
Net Debt as % of Total Assets
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
FY15FY16FY17FY18FY19
Gross Dividend –cents per share

5
ASM 09 October 2019
David Mair
CEO Address

6
ASM 09 October 2019
FY19: Record Revenue of $245.8 million and NPAT of $29.1 million
Revenue & NPAT
0
50
100
150
200
250
300
FY15FY16FY17FY18FY19
Revenue NZ$ Million
0
5
10
15
20
25
30
35
FY15FY16FY17FY18FY19
Net Profit after Tax NZ$ Million

7
ASM 09 October 2019
Approach & Markets

8
ASM 09 October 2019
Industrial Division
NZ$ MillionFY15FY16FY17FY18FY19
Revenue123.0132.0131.2151.5157.1
EBIT14.015.317.120.822.9
EBIT %11.411.613.113.714.6
Revenue up 4% and EBIT up 10% against pcp
Growth into water and flow control applications
•Existing and new customers in US and Australia
Growth of vacuum systems in oil & gas applications
•Innovation and customer focus in the US
•US/China tariffs impact
Growth into high performance foam applications
•Global, particularly US : Ultralon U-Dek
Sales into roofing applications down
•Slowdown in Australian market
0
5
10
15
20
25
FY15FY16FY17FY18FY19
NPAT (million)
EBIT NZ$ Million

9

10
ASM 09 October 2019
Agri Division
Revenue and EBIT flat against pcp
Mixed dairy market
▪US and Europe up, NZ and Australia down
▪Operational process and efficiency improvements
Footwear strong
•Growth in NZ with traditional rural retailers and hardware/safety channels
•Growth internationally with specialist boots including new developments for
electrical and firefighting applications
•Operational performance good
NZ$ MillionFY15FY16FY17FY18FY19
Revenue80.579.679.289.088.8
EBIT22.118.819.822.822.8
EBIT %27.423.624.925.625.7
0
5
10
15
20
25
FY15FY16FY17FY18FY19
NPAT (million)
EBIT NZ$ Million

11

12
ASM 09 October 2019

13
ASM 09 October 2019
Liz Coutts
Resolutions

14
ASM 09 October 2019
Liz Coutts
Questions

15
ASM 09 October 2019
Liz Coutts
Meeting Close