By Philip Wen
The diversified manufacturer Hills Industries has bounced back from a horror 2009 to more than quadruple its net profit and lift its full-year dividend by a quarter.
The maker of the iconic Hills Hoist clothesline posted a net profit of $40.2 million for the year ended 30 June, up from $9.5 million last year, though last year’s figure was weighed down by $18.5 million in writedowns and other significant items.
While the result was within the upper range of the company’s previous guidance, shares surged by as much as 12 per cent to $2.43 in late morning trade, as the company’s shareholders warmed to the company’s improved result, positive outlook and increased dividend. The company announced a fully-franked final dividend of 5.5 cents, bringing its full-year dividend to 12.5 cents, up from 10 cents last year.
Managing director Graham Twartz said the key to the strong result was a more focused approach on the profitable parts of the business and the streamlining of its product range, resulting in a ‘‘better quality’’ of earnings. The surge in profit was achieved on slightly lower sales compared to last year.
‘‘We undertook a whole lot of restructuring initiatives, we got out of some businesses that weren't performing well,’’ Mr Twartz said. ‘‘We really focused the business on where we could make money.’’
The biggest turnaround was in the company’s home hardware division, which includes its clotheslines and ladder products. After an operating loss of $3 million last year, Hills decision to discontinue a range of unprofitable product ranges paid off, with the division returning a $10 million profit.
But while Hills is Australia’s largest distributor of clotheslines and ladders, its homeware division only makes up one-fifth of its total revenue, with more than half of the group’s sales and earnings coming from its building and industrial products division. The division posted a 5 per cent fall in sales and 17 per cent fall in earnings, reflecting continued weakness in the commercial building sector.
Hills forecast a moderate lift in earnings for 2010-11, as trading conditions continue to improve.
“We remain focused on retaining the business improvements implemented and have a number of growth initiatives in place to deliver a modest improvement in profits for 2011,” Hills’ chairman, Jennifer Hill-Ling, said.
pwen@smh.com.au