Automotive leather lifts Schaffer profits

23 February 2012

Schaffer Corporation Limited (SFC) announced February 21, net profit after tax (NPAT) of A$4.4 million for the first half of the 2012 financial year - a more-than-100% increase in NPAT over the previous corresponding period (A$2.0 million), US$1 = A$0.93. Schaffer have a mixed portfolio of businesses including building materials and property as well as auto-leather.

The interim result was driven by a much-improved performance at the Automotive Leather division, which was previously impacted by the closure and sale of Schaffer’s Mexican leather cutting operations. The result in the Automotive Leather Division was complemented by an increased EBIT result the company’s Building Materials division.
SFC also announced that the Board had declared an interim ordinary dividend of A$0.10 per share. The dividend will be paid on March 23, 2012.

In the calendar year to December 31, 2011 SFC has reduced net debt by A$22.4 million. The decreased net debt, combined with lower interest rates, has reduced interest expense for the half-year by A$0.5 million (28%) compared to the prior period.
Automotive Leather increased revenue from continuing operations by 42% to A$48.7 million. Without the impact of the closure and sale of the loss-making Mexican leather cutting operations, EBIT more than doubled while EBIT from continuing operations also increased substantially (A$4.7 million compared with A$4.2 million).
New and existing supply programs at the Slovakian and Chinese operations generated an overall 64% increase in the volume of cut leather sales. Cut leather volumes in China increased 120% and in Slovakia by 42%. The increases more than offset the loss of volume and revenue from Mexico.
Automotive Leather sold a higher value product mix but the increased average selling price per square metre was eroded by the negative impact of the Australian dollar appreciating against the US dollar and Euro. Margin was also affected by an increase in hide prices, resulting from the higher value mix of product and increased market pricing. That impact was partially offset by the appreciation of the Australian dollar against US- dollar-priced imported hides.

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