Buffett InvestorsNZX
Back
SKL.NZ

Skellerup: The 100-Year-Old Rubber Company Quietly Delivering 16% Earnings Growth and a 5.4% Yield

The Most Boring Stock You Should Probably Own

Skellerup Holdings doesn't make headlines. It makes rubber — dairy liners, pipe seals, gumboots, gaskets, and precision-engineered components for industries you've never thought about. Based in Christchurch with a history stretching back over 100 years, it's about as far from a glamour stock as you can get.

And yet, Skellerup has been quietly delivering the kind of returns that flashier companies promise but rarely achieve. The stock is trading around $5.55 NZD, up significantly from its 52-week low of $3.35, with earnings growing at double digits and a dividend yield that income investors dream about.

FY2025: Steady Growth Across the Board

Skellerup's FY2025 results showed a business clicking into gear:

  • •Revenue: $353.5 million, up 6.9% on the prior year
  • •Earnings: $54.6 million, up 16.3%
  • •FY2026 earnings guidance: $55–$60 million
  • •Q1 FY2026 update: Earnings up 10%, with strong demand in dairy and infrastructure
  • •Dividend yield: ~5.4% (based on $0.21 per share annual dividend)

The profit growth outpacing revenue growth tells you margins are expanding — Skellerup is getting more profitable, not just bigger. And the Q1 FY2026 update confirmed that the momentum hasn't stalled.

Two Businesses, Both Working

Skellerup operates through two divisions:

Agri Division: Skellerup is the second-largest manufacturer of food-grade dairy rubberware in the world. If you've ever been on a dairy farm, there's a good chance the milking liners, tubing, and filters were made by Skellerup. The division also makes the iconic Red Band gumboots — practically a uniform for NZ farmers. With global dairy production growing steadily, this division benefits from both replacement demand (rubber wears out) and new installations.

Industrial Division (Gulf Rubber): This arm designs and manufactures precision-engineered rubber and plastic components for infrastructure, water, automotive, medical, and mining customers globally. Products include pipe seals, diaphragms, valves, O-rings, and custom mouldings. Infrastructure spending — particularly in water and wastewater — has been a strong tailwind.

Both divisions share a common strength: their products are critical, low-cost components in much larger systems. Nobody skips replacing a $2 pipe seal to save money on a $2 million water project. This gives Skellerup pricing power and recession resistance that's unusual for a company its size.

Key Metrics

  • •Share price: ~$5.55 NZD
  • •Market cap: ~$1.09 billion NZD
  • •52-week range: $3.35 – $5.49
  • •P/E ratio (trailing): ~18x
  • •Dividend yield: ~5.4%
  • •Forward EPS consensus: $0.30 NZD
  • •Analyst target: $5.50–$6.60 NZD

At 18x earnings with a 5.4% yield, Skellerup offers a rare combination of growth and income. The P/E is reasonable for a company growing earnings in the mid-teens, and the dividend provides a solid income floor while you wait.

Why It's Under the Radar

Skellerup's problem — if you can call it that — is that it's boring. There's no AI angle, no cryptocurrency exposure, no viral product. It makes rubber parts for dairy farms and water pipes. Financial media doesn't cover it. Retail investors scroll past it.

But boring can be beautiful. Skellerup has compounded shareholder returns for decades by doing the same thing well: manufacturing essential products at high margins, expanding internationally, and paying consistent dividends. It's the kind of stock that Peter Lynch would have loved — a simple business doing simple things profitably.

What to Watch

  • •FY2026 earnings guidance range ($55–$60M): The Q1 update at +10% growth suggests the company should land comfortably in this range. Beating $60 million would be a catalyst for re-rating.
  • •Dairy cycle: Skellerup's Agri division benefits when farmers are investing in their operations. With NZ milk prices strong (Fonterra's midpoint at $9.70/kgMS), the backdrop is supportive.
  • •Infrastructure spending globally: Government investment in water infrastructure, particularly in the US and Australia, drives demand for Gulf Rubber's products.
  • •Acquisition opportunities: Skellerup has historically grown through disciplined bolt-on acquisitions. Any new deals could add growth.

The Bottom Line

Skellerup is one of those rare NZX stocks that gives you growth *and* income without requiring you to take on excessive risk. A 16% earnings increase, a 5.4% dividend yield, and a business model built on essential, high-margin products is a compelling combination. At 18x earnings, you're not paying a premium for quality. The risk is limited — a global recession would hit volumes, and a dairy downturn would slow the Agri division — but for a core portfolio holding, Skellerup is hard to beat.

*Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice. Stock data may not be real-time. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.*