Skellerup Holdings Limited, Annual Meeting 2025

26 September 2025

Skellerup Limited (SKL)

The company will hold its Annual Shareholders Meeting at 2.30pm Thursday 23 October 2025.

The location is Te Pae Convention Centre, 188 Oxford Terrace, Christchurch.

You can also join the meeting online at this link.

Company Overview

The company is a designer, manufacturer and distributor of polymer and elastomer products and vacuum systems to customers in dairy rubber ware, water and related infrastructure, roofing, plumbing, automotive, mining and a range of other industrial applications.

It has two divisions – Industrial and Agri – employing over 800 people. It has over 3,700 customers in 87 countries worldwide. Over 80% of its revenue is generated from international markets with manufacturing and distribution facilities and partners in New Zealand, Australia, China, Vietnam, UK, Italy, and USA.

Of note, the company is the second-largest manufacturer of dairy rubber ware in the world.

Current Strategy

Skellerup is a global leader in the design, manufacture and distribution of precision engineered products. It works closely with customers to define and solve their problems through a deep understanding of material properties, tool design, and manufacturing processes.

The company provides innovative solutions for customers in a wide range of critical and high-performance applications including dairy, potable and wastewater, roofing and construction, plumbing sport, and leisure, electrical and appliances, health and hygiene, automotive, and mining.

Previous Year Shareholder Meeting

NZSA recorded the following key items at last year’s annual shareholder meeting:

1. FY24 delivered a record EBIT for the Group of $72.7 million.
2. To mitigate US tariffs  the company may consider “in-market” manufacturing.
3. Underlying NPAT was $50.0 million, just under 2023’s record of $50.9 million, due to an increased tax burden and higher interest charges.

The meeting report is available at this link.

Disclaimer

To the maximum extent permitted by law, New Zealand Shareholders Association Inc. (NZSA) will not be liable, whether in tort (including negligence) or otherwise, to you or any other person in relation to this document, including any error in it.

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Key

The following sections calculate an objective rating against criteria contained within NZSA policies.

Governance

NZSA assessment against its key policy criteria are summarised below.

Directors Fees: Excellent disclosure.

Director Share Ownership: In line with NZSA policy Directors are not required to own shares however all do.

CEO Remuneration:  The company discloses its remuneration policy on its website, which includes an overview of the remuneration philosophy applicable to the company. The Remuneration Committee is responsible for implementing the policy.

Incentives: The CEO is paid a short-term incentive (STI) in cash and a long-term incentive (LTI) by way of share options.

NZSA encourages fulsome disclosure in relation to any incentive payments made to the CEO, including disclosure of measures (or measure ‘groups’), weightings, targets and the level of achievement versus target for each component associated with any awards. This methodology is supported by the new NZX Remuneration Reporting Template.

For both STI and LTI, there is no disclosure as to the ‘target’ award level in relation to base remuneration. The design of the scheme does not support a target remuneration mix.

The methodology for the STI is set out on page 36 of the Annual Report. As the STI scheme is a profit share scheme, based on achievement of EBIT (with a high-water mark), NZSA notes there is no cap on the maximum amount able to be earned.

LTI share options have been issued every two years, with an exercise price relating to a formula calculated at the time of issue. Graham Leaming, in his previous role as CFO, was granted 800,000 options on 1 November 2022, at an exercise price of $5.17 per share. The exercise price was the weighted average share price on the twenty-day trading period preceding issuance. The options were exercisable in the period beginning on 1 September 2024 and ending on 1 November 2024. As the share price was below the exercise price upon vesting, these options were not exercised, and lapsed on 1 November 2024.

Leaming was granted 300,000 options on 3 October 2024, at an exercise price of NZ$4.85 per share. The exercise price was the weighted average share price on the twenty-trading day period preceding issuance. The options will be exercisable in the period beginning on 1 September 2027 and ending on 1 November 2027.

Note:

• The relationship of the number of options granted to the CEO’s base salary is not disclosed. NZSA encourages disclosure of this relationship.
• Previous options were issued with a vesting period of 2 years, a term NZSA believes is not reflective of ‘long-term’ performance. We note that the options issued in October 2024 now reflect a 3 year vesting term – a change fully supported by NZSA.
• Nonetheless, the options remain exerciseable within a very narrow time window, which may incentivise conduct not linked to long-term performance. This is a likely feature of the option-based incentive (as opposed to a more typical ‘performance rights’ scheme).

We also note that this narrow exercise window is likely to have disadvantage the CEO in relation to the 2024 exercise date. NZSA continues to encourage the company to design the vesting structure to better align with long-term shareholder performance, and better recognises the controllable outcomes of the CEO.

The nature of the STI calculation means there is no theoretical ‘cap’ on STI, albeit a high hurdle rate applies. This means that NZSA’s preferred weighting towards LTI (to align with the long-term interest of shareholders) cannot be calculated.

The company is one of very few that offers disclosure of both the gender pay gap and CEO/employee remuneration ratio.

Golden Parachutes: In the interests of transparency, NZSA believes there should be explicit disclosure around the severance terms and notice periods associated with the CEO, including whether specific termination payments are offered.

NZSA appreciates the clear statement in the Annual Report: “Skellerup does not make discretionary sign-on, retention or departure payments to incoming or existing employees (including non-executive Directors).”

Director Independence:  A majority of the Directors are independent.

Board Composition:  The company does not participate in the IoD’s Future Director programme designed to develop and mentor the next generation of Directors. NZSA expect NZX50 companies to participate as part of a responsibility to develop and mentor the next generation of Directors.

Skellerup provides thorough disclosure of the skill sets associated with individual Directors and their relationship to the overall ‘collective’ skills required to govern the company. This is also highlighted on their website. The nature of the company’s Board indicates a commitment to thought, experiential and social diversity, with relevant experience for Skellerup.

In last year’s Annual Report, the Chair commented on the former Managing Director and CEO continuing to serve on the Board. NZSA assesses each situation like this on its merits: Mair’s retention on the Board may create undue influence in the new CEO (Graham Leaming) charting any revision to strategy. On the other hand, his institutional knowledge is likely to offer support to the new CEO in the short-term. We remain comfortable with the experience he brings to the Board.

Director Tenure:  NZSA looks for evidence of ongoing succession or ‘staggered’ appointment dates that reduce the risks associated with effective knowledge transfer in the event of succession.  We also prefer a term maximum of 9-12 years, unless there are exceptional circumstances that may apply.

We have commented on David Mair’s capability above. Given that he has been on the Board since 2006 (as Managing Director for most of that period), we will seek clarification as to future tenure as part of this year’s re-election resolution. Chair, John Strowger, was appointed in 2015, so we would also expect to some indication of his future tenure. 

NZSA believes that the loss of both these Directors would represent a loss of institutional knowledge – on this basis, we encourage the company to provide clarification to shareholders as to how the company’s Board succession is being managed, together with associated timelines.

Other Directors were appointed between 2016 and 2022. 

ASM Format: Skellerup Limited is holding a ‘hybrid’ meeting, (i.e., physical, and virtual), a format preferred by NZSA as a way of promoting shareholder engagement while maximising participation.

Independent Advice for the Board & Risk Management: NZSA looks for evidence, through disclosures, that a Board has access to appropriate internal and external expertise to support board assurance activities. We also look for evidence that Boards are across their risk management responsibilities.

We note that the statement in the Board Charter that “A committee or individual director may, with the prior approval of the Chair of the Board, engage professional advisers at the Company’s expense to advise or assist them in carrying out their responsibilities.” It is unclear, however, as to the extent to which internal assurance staff have unfettered access to the Board. Discussions have indicated that the company does not have any internal assurance staff, operating a ‘co-sourced’ model for internal audit that reports to the Board. The Board also undertakes a significant programme of site visits.

The Annual Report offers good disclosure as to its financial, non-financial, business, operations, and climate change risks and how these are governed and managed.

Audit

NZSA assessment against its key policy criteria are summarised below.

Audit Independence:  Good disclosure.

Audit Rotation:  Good disclosure. The company ensures the Lead Audit Partner is rotated at 5 years as required by the NZX Listing Rules. The lead audit partner was appointed in 2023, with the audit firm (EY) appointed in 2002. Whilst understanding the constraints around audit firm rotation we would appreciate some disclosure around the process for testing the market as regards audit capability and/or re-tendering.

Environmental Sustainability

Overall approach: Skellerup now reports in full compliance with the four-pillar framework and provides detailed transition and adaptation plans. NZSA notes that Skellerup has made progress in aligning its reporting with expectations, with stronger integration of climate into strategy. Although Skellerup’s FY2025 reporting focuses on climate compliance, the company also delivers broader environmental benefits. It has introduced a new gasket to reduce potable water leakage, invested in manufacturing upgrades that minimise waste and energy use, and developed innovative products such as hydro-excavation systems and lightweight foams that support more sustainable industry practices by minimising damage to ecosystems. These steps demonstrate that the company is extending its environmental impact beyond climate-related requirements.

Sustainability Governance: The Board maintains a formal skills matrix, which includes ESG capability as a core competence. Six out of six directors list ESG among their skills, and a dedicated Sustainability Committee has been established to oversee climate and environmental matters. At the management level, the CEO oversees climate-related risks within the overall strategy, and the CFO leads the ESG strategy, ensuring senior accountability.

Strategy and Impact: Skellerup reports that climate change is already influencing its long-term strategy. The Group developed an Emissions Reduction Plan for its largest Christchurch facility, as well as the first edition of a Group-wide Adaptation Plan. The transition plan outlines initiatives such as LED retrofits, modernisation of manufacturing equipment, and supply-chain adjustments. Management notes growing customer demand for ESG transparency, reinforcing that climate impacts are increasingly shaping business relationships and strategic choices.

Risk and Opportunity: Physical, transition, and market risks are described, along with their corresponding mitigation responses. Opportunities are also highlighted, such as the role of Skellerup’s products in securing potable water and adapting to climate change. The Adaptation Plan outlines specific actions, timelines, and capital investment requirements, demonstrating that risks are being actively managed through forward-looking plans.

Metrics and Targets: Skellerup continues to measure and disclose Scope 1 and 2 GHG emissions, with year-on-year comparatives showing intensity reductions. Limited Scope 3 categories are disclosed, with a clear pathway to expand reporting across all subsidiaries from FY27. While the company has not yet set emissions-reduction targets, it has signalled that this work is underway. This remains a gap compared with best practice.

Assurance: For the first time, Skellerup’s Scope 1 and 2 GHG inventory has been subject to limited external assurance, with EY engaged as the independent assurer. This step significantly improves the credibility of reported data and marks progress from the prior year, when no assurance was provided. NZSA encourages the company to extend assurance over time to include Scope 3 disclosures and, where relevant, other sustainability claims.

Ethical and Social

NZSA assessment against its key policy criteria are summarised below.

Whistleblowing:  Good disclosure.

Political Donations: The company notes that “Under Skellerup’s Code of Ethics, contributions to political parties are expressly prohibited.”

Financial & Performance

Skellerup’s share price rose from $4.55 to $5.19 (as of 30^th September 2025) over the last 12 months – a 14% increase. This compares favourably with the NZX 50 which rose 6% in the same period. The capitalisation of SKL is $1.0b placing it 34^th out of 115 companies on the NZX by size and makes it a large company.

¹ per share figures based off actual shares at balance date (not weighted average)

Skellerup continued its strong performance from last year into 2025.

Revenues were up 7% to $354m and Cost of sales were also up 7% leading to a static profit margin of 43%, and gross profit increased 7% to $78.0m.

NPAT was up 16% to $54.5m which provided EPS of $0.278 and enabled SKL to pay an increased dividend of $0.255. Dividends are only partially imputed to 14% and we note that EPS is only just higher than dividend payments. The company should look at more tax efficient, alternate means of distributing excess cash.

The PE ratio dropped slightly to 19.

The company has traded well, and inventory turnover arrested its decline and rose to 2.68, back to 2023 levels but well below turnover ratios achieved in 2021 and 2022. The rise in 2025 is impressive considering inventory levels also rose. SKL remains in a sound financial position with an ever-decreasing debt-equity ratio of 0.45 and paid off $4m of long-term debt during the year. SKL have ample balance sheet room should they wish to take on more debt.

SKL trade at a generous 489% premium to their NTA of $0.88. This is partly a reflection of their exceptional performance and also their relatively large holding of intangible assets on the balance sheet.

The company also provided a 16 page investor presentation but did not provide any forward-looking guidance.

The company register is extremally widely held and the largest shareholder is Forsyth Barr Custodians Limited.

Resolutions

Rachel Farrant was appointed to the Board in May 2022. She is a Partner at BDO Wellington Limited and has over 20 years’ experience in chartered accountancy and business advisory services and over 10 years’ experience as a Director across a diverse range of sectors including construction, technology, financial and property. Rachel is currently a Director of New Plymouth Airport, The Property Group and Fair Way Resolution and was previously a Director of Fulton Hogan Limited.

We will vote undirected proxies IN FAVOUR of this resolution.

David Mair was appointed to the Board in November 2006. He was CEO for over 12-years during which time it achieved significant revenue and earnings growth by focusing on designing and delivering critical engineered products for original equipment manufacturer (“OEM”) customers. In March 2022, David was recognised as CEO of the Year in the Deloitte Top 200 Awards. David is currently Managing Director of Sanford Limited and a Director of Forté Funds Management Limited.

Discussions with Skellerup have indicated that Mair has settled well into a governance role, despite his long executive association with the company. NZSA’s key encouragement is for the company to communicate the future plans for ALL its directors and how the culture and knowledge represented by David Mair can be transitioned to future director appointments.

We will vote undirected proxies IN FAVOUR of this resolution.

This is an administrative resolution.

We will vote undirected proxies IN FAVOUR of this resolution.

Proxies

You can vote online or appoint a proxy at https://www.investorvote.com.au/

Instructions are on the Proxy/voting paper sent to you.

Voting and proxy appointments close 2.30pm Tuesday 21 October 2025.

Please note you can appoint the Association as your proxy.  We will have a representative attending the meeting.

The Team at NZSA