SCT - Scott Tech

[Snoopy]

There has been some comment on other threads about SCT being a great place to put money to take advantage of the NZD weakening. So I thought an update was overdue.

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GENERAL: SCT: Securing an order from a major appliance manufacturer

2 May 2008

Dear Sir/Madam

Scott Technology Limited are pleased to announce it has secured key contracts
for the supply of equipment into the international market. These contracts
have been gained despite the difficult trading environment that was indicated
at both the Annual Meeting in December and in the interim announcement in
April.

Scott has secured an order from a major appliance manufacturer in Brazil
worth several million dollars. It is expected that the manufacturing line
will be completed and shipped at the end of 2008 and installed in early 2009.

In addition, Scott has secured an order for its meat processing side of the
business to supply multiple beef de-boning products to a customer in
Australia.

Yours faithfully

Stuart J McLauchlan (Chairman) Christopher C Hopkins (Managing Director)

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The above news is certainly good for SCT in securing the continuity of the workforce which is SCTs best asset. However it is no surprise to me that the share price has not moved. Because these projects would have been secured at the high exchange rates prevailing earlier in the month. If management behave according to historic precedent then they will have hedged these two new contracts already. So any depreciation of the NZD will not help the profitability of these projects or the bottom line of SCT. Indeed these two contracts may have been secured at minimal profit or even a small loss.

Where the NZD decline will help is in the next project. I think SCT has turned the corner. Until that next project is announced, though, I wouldn't be looking for any big moves in the share price.

SNOOPY

discl: hold SCT

[Steve]

SCT are about to move into their new larger premises in Dunedin...

[Snoopy]

SCT are about to move into their new larger premises in Dunedin...

Are you based in Dunedin Steve? If so how much do you reckon the old site is worth?

SNOOPY

[Lizard]

I would have thought it was pretty good news. From what I know, Rocklabs is fairly similar business to ASX:ESS - a company which has performed rather well in recent years.

I think this will create some interest in SCT - though whether the transaction was at a fair price or can be integrated successfully with SCT current business is difficult to tell.

[Steve]

Are you based in Dunedin Steve? If so how much do you reckon the old site is worth?

SNOOPY

Unfortunately, SCT rent the premises from a company associated with Graeme Marsh who was involved with SCT for years.

I believe that the new premises will also be rented from interests of graeme as well, so Graeme will most likely end up being the major winner here...

[sharer]

I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.

[Under Surveillance]

I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.

Thanks, sharer. Can you help by giving the station, date and approximate time when you heard this broadcast? I would like to listen to it on replay to get the context. No doubt (yeah, right) the theme will be fully-explored in the prospectus for the rights issue, but there's no knowing when that will materialise.

Not directly relevant, but I see that SCT are now advertising for 2 General Managers. The blurb, on the SCT website, contains the gem that revenue this year is expected to be $55 million. This compares with $46.6 million in FY 2010, +17%.

[sharer]

Thanks, sharer. Can you help by giving the station, date and approximate time when you heard this broadcast? I would like to listen to it on replay to get the context....

I didn't make a note, but it must have been NatRadio, probably in their regular "business" section after midday, yesterday, i'm guessing.
Anything on their website?

[Snoopy]

I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.

That wouldn't make sense with either their robotics or appliance line businesses. SCT is a skill dependent business and it would take years, even decades to train up a Chinese workforce to replace what they have in Christchurch and Dunedin.

However, with the newly acquired electromagnet business and some of the more more 'standard product' coming out of Rocklabs in Auckland, perhaps moving some production to China might make sense.

SNOOPY

[Under Surveillance]

That wouldn't make sense with either their robotics or appliance line businesses. SCT is a skill dependent business and it would take years, even decades to train up a Chinese workforce to replace what they have in Christchurch and Dunedin.

However, with the newly acquired electromagnet business and some of the more more 'standard product' coming out of Rocklabs in Auckland, perhaps moving some production to China might make sense.


SNOOPY

Snoopy, here is an item which gives insight into the nature of SCT's activities in China.

http://www.asianz.org.nz/our-work/ac...ott-technology