Scott Technology insulated from trade war by geographic spread
Scott Technology is confident it can survive the growing prospect of a US-led trade war with manufacturing around the world spreading its risk, says chair Stuart McLauchlan.
The Dunedin-based maker of robotic and automation systems derives about 94 percent of its revenue from exports and has been a happy buyer of businesses to expand its operations over the years. McLauchlan reminded shareholders at today's annual meeting in Dunedin that he was hopeful US President Donald Trump's new administration would continue the work of its predecessors in liberalising trade flows.
"Unfortunately, we have now witnessed a withdrawal by the United States from this leadership position allowing China to now take this lead," McLauchlan said today. "Overhanging this are the dark clouds of a trade war initiated by the United States threatening to invoke tariffs against their trading partners."
Still, he was optimistic Scott's geographic diversity with manufacturing operations in North America, China and Europe would be enough to counter a trade war.
New Zealand's position as an open economy that trades with the world has been cited by policymakers as leaving the nation vulnerable to trade protectionism. At the recent East Asia Leaders Summit, US president Trump forcefully expressed a preference for bilateral deals as part of his 'America First' stance, having already withdrawn from the proposed Trans-Pacific Partnership and taking a hard-line in the North American Free Trade Agreement renegotiations currently underway.
Despite the cooling appetite for global trade, Scott's McLauchlan told shareholders the company's automation systems were poised to capture a growing appetite among firms to replace their ageing workforces with robotic and digital processes, and it had a "very full" order book across all sectors its services.
"The enquiries being received by Scott for our automation solutions is at an all-time high," he said.
Managing director Chris Hopkins told the AGM the company is "over-capitalised" and needs to grow, which will be through organic expansion and acquisitions.
Scott has about $26 million of surplus cash from its investment by cornerstone shareholder JBS, and Hopkins said his team has looked at more than 30 potential acquisitions but doesn't expect to complete any in the near term.
The shares were unchanged to $3.70 and have climbed 72 percent so far this year.