New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Skellerup Holdings<br>FY20 Preview&nbsp;— Flowing Milk</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>Skellerup&nbsp;(SKL) reports its FY20 result on Friday, 21 August 2020 — we expect earnings&nbsp;to be broadly flat on the prior year despite&nbsp;COVID-19 disruption, driven by a robust performance in its&nbsp;Agri&nbsp;business.&nbsp;SKL&nbsp;has guided to FY20 NPAT in excess of NZ$28m (FB NZ$28.2m). With ongoing&nbsp;COVID-19 and economic uncertainty, our focus will be on the demand outlook for key products. Given the growth in original equipment manufacturer (OEM) business in recent years, we suspect&nbsp;SKL's&nbsp;business is more resilient to economic changes&nbsp;than it has been in the past. OUTPERFORM.</p>
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<h3>Key issues to consider at&nbsp;SKL's&nbsp;FY20 result</h3>
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<li>End customer demand — As we enter a period of heightened economic uncertainty the key question will be the impact on end customer demand for SKL's wide range of products, in particular areas of its Industrial division. Given the consumable nature of its products, we expect the Agri division to be less impacted by changes in the economic outlook.&nbsp;</li>
<li>Operating costs —&nbsp;Social distancing restrictions impacted&nbsp;SKL's&nbsp;production capacity and costs of operation. With restrictions a&nbsp;possibly ongoing recurrence, we seek further insight on the cost implications of these and what management is learning from them.</li>
<li>New business —&nbsp;Ahead of&nbsp;COVID-19,&nbsp;SKL&nbsp;signalled a number of new customer/business opportunities.&nbsp;We look for a progress update and any indication around quantum/timing.</li>
<li>Balance sheet provides flexibility — A conservatively geared balance sheet provides headroom to pursue acquisitive growth should opportunities arise. SKL has had recent success with smaller bolt on acquisitions that add technical expertise and relationships. We look for commentary around performance of recent acquisitions and further possible opportunities.</li>
<li>Recent trading&nbsp;—&nbsp;June/July marks a seasonal peak for&nbsp;SKL's&nbsp;Agri&nbsp;business. July is captured in FY21.</li>
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<h3>Conference call details</h3>
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<p>SKL will host a post-result investor conference call at 10am NZST on 21 August 2020. Dial in 0800 968 400 (Australia 1800 850 171), conference code 383226.&nbsp;</p>
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<div><strong>Guy Hooper</strong></div>
<div><a href="mailto:guy.hooper@forsythbarr.co.nz" target="_blank" rel="noopener">guy.hooper@forsythbarr.co.nz</a></div>
<div>+64 4 495 5255</div>
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Skellerup Holdings FY20 Preview&nbsp;— Flowing Milk

OUTPERFORM
Skellerup&nbsp;(SKL) reports its FY20 result on Friday, 21 August 2020 — we expect earnings&nbsp;to be broadly flat on the prior year despite&nbsp;COVID-19 disruption, driven by a robust performance in its&nbsp;Agri&nbsp;business.&nbsp;SKL&nbsp;has guided to FY20 NPAT in excess of NZ$28m (FB NZ$28.2m). With ongoing&nbsp;COVID-19 and economic uncertainty, our focus will be on the demand outlook for key products. Given the growth in original equipment manufacturer (OEM) business in recent years, we suspect&nbsp;SKL's&nbsp;business is more resilient to economic changes&nbsp;than it has been in the past. OUTPERFORM.


Key issues to consider at&nbsp;SKL's&nbsp;FY20 result



End customer demand — As we enter a period of heightened economic uncertainty the key question will be the impact on end customer demand for SKL's wide range of products, in particular areas of its Industrial division. Given the consumable nature of its products, we expect the Agri division to be less impacted by changes in the economic outlook.&nbsp;
Operating costs —&nbsp;Social distancing restrictions impacted&nbsp;SKL's&nbsp;production capacity and costs of operation. With restrictions a&nbsp;possibly ongoing recurrence, we seek further insight on the cost implications of these and what management is learning from them.
New business —&nbsp;Ahead of&nbsp;COVID-19,&nbsp;SKL&nbsp;signalled a number of new customer/business opportunities.&nbsp;We look for a progress update and any indication around quantum/timing.
Balance sheet provides flexibility — A conservatively geared balance sheet provides headroom to pursue acquisitive growth should opportunities arise. SKL has had recent success with smaller bolt on acquisitions that add technical expertise and relationships. We look for commentary around performance of recent acquisitions and further possible opportunities.
Recent trading&nbsp;—&nbsp;June/July marks a seasonal peak for&nbsp;SKL's&nbsp;Agri&nbsp;business. July is captured in FY21.



Conference call details


SKL will host a post-result investor conference call at 10am NZST on 21 August 2020. Dial in 0800 968 400 (Australia 1800 850 171), conference code 383226.&nbsp;




Guy Hooper
guy.hooper@forsythbarr.co.nz
+64 4 495 5255




Skellerup Holdings: FY20 Preview — Flowing Milk