Leather business accounts for bulk of Schaffer group profits
Earnings for the period exceeded the company’s own expectations of November 2002 of A$9.8 million ($6.1 million) , coming in at A$10.3 million. (For that story, use leatherbiz.com search facility on News page, entering ‘Schaffer’ in search box.) The board doubled the interim dividend to A50¢ a share on the release of the figures, keeping the company on track for the full year dividend of A$1.
Speaking to the national media, Chief financial officer Graeme Monkhouse said he expected second half earnings to fall back to around A$6.8 million as slightly lower sales, combined with some margin compression associated with normal seasonal trends, took effect. Even so, they would still come in above the previous year’s $A6.3.
Commenting on other aspects of the group’s leather business, Mr Monkhouse said cost pressures and fluctuating sales forecasts were making the division’s automotive business increasingly difficult to predict. However, he considered there was still new business to be won with the car makers.
Mr Monkhouse said Schaffer was barely exposed to currency fluctuations in that the hides it used were priced in US dollars and half the group's revenues were received in US dollars. In that so much of the group's purchases were paid for in US dollars, however, currency fluctuations tended to have a greater impact on sales than on profits. In the latest period, the strengthening of the Australian dollar had cost Schaffer around $5 million in sales revenues on translation, but only about $100,000 in profits. The group's return on capital was 29 per cent, based on the $19 million in earnings before interest and tax.
