Skellerup resilient in face of Covid-19

24 June 2020
Skellerup resilient in face of Covid-19
Skellerup has provided a further update on the impact of Covid-19 on its business and guidance on
FY20 net profit after tax (NPAT).
We are sure that all shareholders understand that our focus has been first on our people and
secondly our customers. Over the past five months we have ensured a safe working environment for
our people across the world. Our leaders and teams have worked together extremely well to
implement new ways of working including maintaining safe physical distancing. Many of the changes
implemented will remain as the new norm for how we work at Skellerup. We are delighted with the
resilience, adaptability and commitment of our people to maintain safe operations and meet the
needs of customers.
The strength and resilience of our Agri business has been particularly evident. As countries around
the world gradually moved into lockdown, we were uncertain what the immediate future would
bring. However, demand has remained strong and our facilities in New Zealand (NZ) and the United
Kingdom have continued to provide essential food grade consumable products for customers across
the world. Put simply Skellerup products are essential to the continued global supply of milk and
milk products. Meeting this demand has been challenging, with changes in layouts to operate safely
and the changes to shift patterns and staff impacting on our capacity and increasing costs. At our
largest facility in Wigram, Christchurch, we have overcome the equivalent of at least two weeks’ lost
production, faced additional costs and paid staff who were unable to work either because of health
issues or age. We are now operating at about 90% of previous maximum capacity, but we have
improved productivity more quickly than anticipated to meet demand and consequently we have
returned NZD 1.5 million in wage subsidy payments.
Our Industrial business serves a more diverse range of customers and applications and as such has
experienced a broader range of impact. The gradual implementation and continuation of lockdowns
in some countries caused a slowdown in late March and April for products we sell into applications
such as water and wastewater infrastructure. Similarly, the slump in oil and gas prices has caused
reduced demand for products used in applications supporting this industry. In NZ the lockdown
conditions meant that some of our businesses could only operate at a limited level to supply only
those products deemed essential. However, demand in some markets and for some of our products
remained strong. During May and June, we have seen a rebound in overall levels of demand as
restrictions have eased and activity increased across the world. Our strategy to focus on specialist
products for OEM applications in infrastructure, roofing, flow control, health and medical
applications places us in a strong continuing position.
The strength and quality of our customer base in both divisions combined with our efforts over the
past year to improve payment terms, mean that despite a slight increase in provisioning, our
operating cash flow is very strong, our debt low, and our balance sheet robust.

Prior to the Covid-19 outbreak, Skellerup was on track for a record result in FY20. At the end of
March 2020 NPAT for the year to date was ahead of the prior comparative period. Having absorbed
increased costs of operation and demand interruption in the final quarter we expect to deliver a full
year NPAT in excess of NZD 28 million.
We are well placed to invest soundly to generate sustainable earnings growth and strong
shareholder returns in the years ahead.

For further information please contact:
David Mair Graham Leaming
Chief Executive Officer Chief Financial Officer
021 708 021 021 271 9206