Brisbane industrial company, Campbell Brothers has overcome a sharply higher Australian dollar and a continuing weakness in one of its businesses to post a record net profit for the full year ended March 31.
The company, which is now predominantly a minerals services business, with chemicals and a couple of other divisions, said the record result was struck despite the value of the Australian dollar rising from the 77 USc level in 2007 to an average of 88c in 2008.
The company gets much of its revenue and earnings from offshore as its major business; ALS Laboratory group expands through the global mining industry and into newer areas.
The company said net profit after tax (excluding the gain on the sale of shares held in CCI Holdings Limited) attributable to underlying operations was $71.3 million, up 38% on the $51.6 million (excluding the gain on sale of Campbell Brothers Services division) recorded last year.
Net profit before one-off items rose 30% to $76.82 million.
The Company would pay shareholders a final dividend of 60c per share (50% franked), bringing the total full-year dividend to 95c per share (50% franked), up from 70c last year (50% franked).
The company shares ended 41c up to $28.11, still well under the all time high of $36 reached early last December, just before the full impact of the credit crunch broke across the Australian market with the failure of Centro to complete a major refinancing.
The impact of the dollar cut earnings by more than $5 million.
"The average exchange rate used to translate US dollar earnings in the 12 months ended 31 March 2008 was $US0.88 compared with $US0.77 for the previous corresponding period," the company said.
"The movement is estimated to have decreased after-tax profit for the financial year by $5.4 million. Measures implemented during the financial year to offset adverse moves in the currency included price reviews and moving to non-US dollar denominated contracts where appropriate.
"Operationally, ALS reported excellent increases in both revenue (up 37%) and earnings (up 42%) compared to a year ago. Strong growth in mineral analysis markets across all geographic regions, on the back of a robust resources and mining industry, and strategic acquisitions provided the foundation for the result."
Campbell Brothers Chairman Geoff McGrath said the strong increase in underlying profit was driven by another excellent performance by the ALS with buoyant markets and strategic acquisitions allowing the division to offset the adverse impact to Campbell Brothers of the stronger Australian dollar.
The Company also benefited from an improved contribution from the chemical division, reflecting the success of cost-control initiatives implemented in the previous financial year.
“Campbell Brothers produced record sales, profits and dividends in the 2008 financial year through a combination of organic growth, acquisitions and cost-reduction initiatives,” Mr McGrath said. “The platform for this outstanding result was the Company’s successful and ongoing strategy of targeting high-growth markets and industries in which it holds a competitive advantage.”
Campbell’s Chief Executive Officer Greg Kilmister said the excellent performance last year highlights the success of the three year plan developed in late 2004, and creates a strong platform for future ongoing growth as Campbell Brothers embarks on its next phase of development.
“The Company’s standout performer was ALS, which now contributes 89% of divisional profit and 61% of revenue,” Mr Kilmister said. “ALS clearly demonstrated its resilience during the financial year by achieving strong increases in revenue and contribution despite unfavourable movements in foreign exchange rates. Buoyant international minerals analysis and environmental testing markets underpinned the result, while strategic acquisitions were bedded down quickly and began contributing sooner than anticipated,” he said.
During the year, a new strategic plan was completed to guide ALS through to 2011. A key outcome was the decision to restructure ALS from a geographically-based business to one run along divisional lines, comprising Minerals, Environmental, Coal, Food and Tribology.
This approach will allow ALS to better focus on expanding its position and industry-leading capabilities in existing and new global markets.
The company said that revenue from the Chemicals business rose slightly while the division’s earnings contribution was "pleasingly stronger despite higher raw material costs, demonstrating the ongoing success of cost-control measures".
"This attention to costs allowed both the Industrial Chemical and Panamex Pacific business units to perform well compared to the previous year. “Campbell Chemicals continued the strong improvement seen in the first half, reflecting lower costs across the division,” Mr Kilmister said. “The 25% increase in contribution over the previous year was an outstanding result given market conditions.”
The Reward Distribution business "improved revenue through acquisitions made in the past 18 months but contribution was disappointing, declining compared to the previous year. The business struggled to overcome higher-than-expected integration and restructuring costs amid the previously announced national rationalisation of products, warehouses, IT systems and administrative functions.
"Also, adverse weather conditions in late 2007 and early 2008 disrupted several markets, whilst in general the domestic hospitality market slowed due to a stronger Australian dollar, rising interest rates and higher petrol prices.
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