All right. Tim says it's close enough to 10:00 A.M., so we'll get underway. Good morning. Thanks for joining this presentation on Skellerup's FY 2026 results. As most of you will know, I'm Graham Leaming, the CEO, and with me is Tim Runnalls, our CFO. As per normal, Tim and I will provide an overview of the business, and then we'll take questions at the conclusion of the presentation. Please keep your microphones on mute. Chris Gibson from ASP, I can see you're live at the moment, so if you wouldn't mind muting, thank you. When we get to question time, what we'll do is if you can either raise your virtual hand or use the chat function to alert us that you've got a question. I'll move to slide two.
As the trends on the graphs on this page demonstrate, we continue to achieve sustained revenue and earnings growth alongside excellent returns on investment. Over the past seven years, compound annual revenue growth has been 7%, and compound annualized normalized NPAT growth stands at 12%. Over this period, we've continued to focus on precision engineered products for high-performance and conformance applications. We consider this fundamental focus provides us with ample opportunity. We are investing in market development to ensure we understand needs and to grow our reach, and in technical capability to translate opportunity into products, and in our manufacturing platform to productively deliver the growth. The timing of our investments in people and equipment continues to be robustly considered, planned, and supported to maximize the likelihood and speed of success, and maintain excellent returns on capital invested.
As shown on the graph here, in FY 2026, our ROIC was almost 25%. We'll move to slide three. Focusing now on FY 2026. A very good year for us, measured by both the financial outcomes and the progress we've made investing in future growth. Firstly, the numbers. Normalized EBIT was up 14% on the prior comparative period, which was the prior record. As the graph shows, over the past seven years, as we typically do, we're reporting our CAGR, and that's sitting at 11%. Revenue growth was realized in all markets, most notably the U.S., and across a broad range of applications we are focused on. Gross margins improved as we overcame the impact of tariffs, and in the second half, raw material availability and cost increases arising from the conflict in the Middle East.
Normalized EBIT excludes a NZD 4.8 million non-recurring gain that Tim will cover more on later. Our operating cash flow, also a record at NZD 83.6 million, reflecting both record earnings and a lesser investment in working capital in FY 2026 than we made in the prior year when we were building up inventories in anticipation of U.S. tariffs. These financial results mean we've increased the full-year dividend to an aggregate of NZD 0.30 per share, up 18% on the prior comparative period, commensurate with the increase in Net Profit After Tax. Importantly, in market, we've established a direct presence for our dairy consumables in China. That'll enable us to grow in a substantial market. Also, we talked about last year how we were establishing a converting and distribution facility in the Netherlands for our marine foam market.
That is well-established now, and it provides a platform not only for that business, but also to sell more of our products in continental Europe. We have also continued to invest in our product development capability and our manufacturing platform, most notably at our largest facility in Wigram. I will go into more detail at a divisional level shortly, but first Tim Runnalls will provide more detail on the group financials and the key drivers of the growth in group NPAT for FY 2026. Tim.
Thanks, Graham . Turning to the seven-year financials. Apologies if some of this is a bit repetitive. Revenue is a record and up 10% on the prior year or up 8% in constant currency terms. The increase is broad-based, with growth in the Industrial Division of 9% and the Agri division of 13%. Foreign exchange rates were favorable throughout the year, with the impact being a tailwind on revenue of approximately NZD 10 million or 3%. Gross margin is up 1 percentage point from the prior year at 44%. Growth in both the Industrial and Agri division showing improvements on the comparative period through a combination of price increases, cost out, inventory management initiatives, and product and market mix. Indirect costs were up NZD 7.7 million or 10% on the prior year. Spread evenly with a mix of impact of the New Zealand dollar on translation.
Investments in people with headcount up 4%, as well as an increase in incentive costs and a necessary increase in property, marketing, and travel and related costs resulting from an increase in service to customers and markets. Overall, this meant normalized EBIT was up NZD 11.2 million. I know Skellerup has a fairly strong natural hedge, but we also hedge our underlying main currency exposures. This means that the revenue tailwind I mentioned earlier of circa NZD 10 million at the EBIT line was relatively neutral. Talking briefly to the concept of normalized EBIT and to ensure comparability with prior years and appropriately evaluate underlying business performance, we have reported underlying or non-GAAP EBIT in FY 2026. We have included a full reconciliation between the GAAP and non-GAAP measures at the end of this presentation and in the annual report.
The largest non-recurring item was a net insurance gain resulting to a fire which occurred in one of our two continuous vulcanization or CV lines in Wigram in August 2025. For context, the revenue earned from products made on these two lines is around NZD 9 million, less than 3% of group revenue. We were able to restart operations on the second line promptly at an increased capacity and have not suffered any loss of customers or sales as a result. We expect to have the new line installed and commissioned by the end of FY 2027. The net insurance gain recorded in FY 2026 is approximately NZD 6.3 million. Partly offsetting this gain is a NZD 1.1 million impairment loss on a right of use leased asset that was surplus to requirements and could not be commercially sublet for a viable rental.
The lease was assumed as part of the acquisition of a business in 2019, and the lease ends within the next 12 months. Lastly, a small asset transfer was made to a manufacturing partner in Vietnam to address a historical importation issue. The net pre-tax gain of NZD 4.8 million is excluded from our normalized EBIT of NZD 89.3 million. Moving to finance costs, these were lower again by NZD 800,000 through a combination of lower market interest rates and a lower average level of net debt. The tax expense reflects an effective tax rate of 25.5%, down one percentage point on the prior year, and is reflective of the proportion of earnings earned outside of New Zealand, particularly in the U.S., which attract a lower statutory rate of tax. The relatively lower finance costs and effective tax rate mean we are reporting an 18% improvement in normalized NPAT to NZD 64.2 million.
GAAP or reported NPAT is up 24% to NZD 67.7 million.
I am going to feel a bit cold, lady.
Again, as a reminder, if you would not mind using your microphones, please.
Can you do that on me?
Can we just pause for a moment, see if we can mute this gentleman's phone. If you're listening, the telephone number 64278 41199, could you please mute your phone or your microphone? We'll continue. We'll continue. As Graham mentioned, dividend per share up 18% in line with the increase in after-tax earnings and 92% payout ratio, in line with the prior year and with the group's dividend policy. Operating cash flow was up 26% on the prior year, driven by the higher after-tax earnings and a relatively lower investment in working capital, as mentioned previously. In FY 2026, we funded capital expenditure of NZD 15.1 million to continue to invest in the business for future growth, as well as a record dividend payout to shareholders of NZD 52 million.
As a result, our net debt has continued to reduce by NZD 10.4 million on the prior year and is less than NZD 2 million at 30 June 2026 or less than 1% of total assets. Moving to slide five and the earnings bridge. As we mentioned, the growth in the Industrial Division was broad-based. We continue to see growth in earnings from the key potable water and wastewater applications, particularly growth in infrastructural pipe sealing and tapware products in the U.S., new pipe sealing and smart metering solutions in Australia, and continued market and product expansion for vacuum systems in the U.S. Roofing & C onstruction demand was driven strongly by growth in demand in the Australian and Asian markets and a continued strong presence in solar applications in the U.K.
Pleasingly, we've seen returning growth for U-DEK marine foam products in the U.S., particularly in OEM channels, which drives the sport and leisure growth. All other Industrial applications, with the exception of automotive, have shown growth over the prior year. Demand for dairy consumables remained strong throughout the year, particularly in international markets. Change in Incoterms with a key customer at the start of the year provided a one-time boost to earnings of approximately 1%. Growth with existing and new customers has contributed positively. Expansion into new markets has commenced. Graham will touch more on this later. The footwear result was flat against the prior year's h igher volumes and revenues were neutralized by higher raw material costs. FY 2026 corporate costs were slightly above the prior year, but remain well controlled at less than 2% of group revenue.
I've spoken briefly to the FX movement with pre-tax revaluation and hedging losses above the prior year impacting unfavorably on the outcome by NZD 1.2 million post-tax. I've previously touched on the favorable changes in interest and tax, with the outcome being the 18% increase in normalized NPAT for the year.
Graham will now cover off in some more detail on our key markets and applications.
Okay. Thanks, Tim. Moving to slide six, this shows revenue by geographic market, and highlights the international business that Skellerup is with more than 80% of our revenue generated from sales in international markets or outside of New Zealand in FY 2026. All markets increased absolute revenue during the past year, with the fastest growth achieved in North America, Asia, and the U.K. and Ireland. North America edged up another percentage point in FY 2026 to contribute 38% of group revenue. Potable water, wastewater, dairy, sport and leisure were the notable contributors. New Zealand remains the next largest market, whilst down 1 percentage point in share, absolute revenue was up NZD 3.7 million or 5% on the PCP, primarily from increased sales into the dairy sector.
European revenue share was down a percentage point as growth from dairy was partially offset by lower sales into Industrial applications, particularly automotive. The Australian market shows being down a percentage point, but that really is in the rounding. It went from 12.5% to 12.4%. Like New Zealand, their absolute revenue was up NZD 4.3 million or 9% on the PCP, from increased sales into potable water and wastewater applications and a recovery in the roofing construction space. As noted earlier on, Asian revenue share increased with growth from sales into roofing construction and dairy. U.K. and Ireland share also increased for the same reasons, growth in sales and roofing construction, and in particular solar and in dairy. Moving down to slide seven, which provides revenue cut, the alternative way by market application.
Our two largest application areas, dairy and water, contributed a greater than average share to the increase in group revenue. All other applications, with the exception of automotive and Health & Hygiene, maintained relative share. Automotive was down due to the slowdown in Europe. Health & H ygiene was impacted by a customer supply chain change in the first half of the year. That customer was back at normal operating levels in the second half of the year. Now moving on to slide eight and a bit more of a focus on the Industrial Division. FY 2026 was our sixth successive year of Industrial Division EBIT growth, and over this period the compounded annual growth rate has been 14%. Potable water and wastewater was the most significant contributor. In potable water, our share into U.S. ductile iron pipe grew, reflecting the quality and reliability of our supply.
Demand for products into U.S. tapware customers recovered on the PCP, and as Tim noted, sales of check valves into smart metering applications in Australia are building. In wastewater, sales in Australia were strong with growing use of plastic pipe and waste applications. In the U.S., and to a lesser extent Australia and Europe, we continue to win share with our vacuum system solutions. Our team do an excellent job with continual product enhancements, delivering high-quality product at industry-best lead times. Roofing construction is the second-largest application area for the Industrial Division. Growth continued in the U.K., albeit not as rapidly as in the preceding two years. Asian demand increased. Australasian sales increased a little, but the U.S. was slower than planned as we delayed some new product launches due to tariff uncertainties.
Health & H ygiene was down slightly due to the first half, as I noted, when our largest customer suspended delivery whilst it made changes to its assembly operations. We continue to realize growth in what we term Industrial control applications, particularly in the U.S., where our products are used to control air and gases in a range of applications, HVAC, appliances, et cetera. Freight and tariff costs were higher, but the margin impact was mitigated by price improvements, cost reductions and new product introductions. I move to slide 9 and some discussion on Agri. FY 2026, our second successive year of Agri Division EBIT growth, an increase of 12% over PCP. But notably in constant currency terms, the increase was 16% at the EBIT level.
As Tim noted earlier, whilst revenue was boosted by a weaker New Zealand dollar, our natural hedge and hedging arrangements negated this at the EBIT level. Just as a reminder, the Agri Division comprises our dairy and footwear businesses. Dairy contributes approximately 80% of the revenue and footwear 20% of the Agri Division revenue. The main driver of the growth in the Agri Division results in FY 2026 was increased sales of dairy consumables into international markets. International sales now comprise 70% of the dairy group revenue. Sales in New Zealand, though, were also up and increased 11% on PCP. The growth came from sales of new and existing products and came from both OEM customers and our own branded products. Those of you familiar will recognize the brands of Conewango, maybe less so Evolution and Reflex, and more recently Thriver.
Growth across the portfolio of OEM customers and their own branded products. The investment we've been making in modernizing and boosting our manufacturing capacity, most notably at Wigram, meant we efficiently and effectively delivered the increased demand. In fact, we've continued to operate some older equipment that we had anticipated beginning to phase out to meet that demand. Footwear earnings were flat in 2026. Higher sales, especially footwear in the U.S., were offset by anticipated higher material costs, freight and tariff costs. Sales in New Zealand, which comprise 65% of footwear revenue, were relatively flat. Moving down to slide 10, Tim's just going to cover off an update on ESG matters.
Thanks, Graham. Skellerup's continued to report under the New Zealand Climate-related Disclosures or CRD regime. This has included the development of a further four emissions reduction plans for our major manufacturing and distribution sites during the year, bringing 63% of our Scope 1 and 2 emissions under such plans. We remain on track with these plans and are implementing commercially viable emission reduction initiatives across the group, with several of these completed or underway. The measurement of greenhouse gas emissions continues to be an onerous task, particularly Scope 3 emissions. However, with investments in better utilization of our systems, we've made meaningful progress in streamlining this process. We continue to drive efficiency in this process to reduce the burden of this on our teams where this makes good commercial sense. Positively, our Scope 1 and 2 emissions continue to reduce.
Relative to growth in activity of the group, these have reduced a further 14% on FY 2025. Whilst we endeavor to reduce our consumption, it should be pointed out that these emissions are largely determined by the electricity grids in the countries in which we operate, and we're therefore somewhat unable to control the outcome. Pleasingly, in FY 2026, we've also seen a successful trial of a used dairy rubberware recovery scheme in the North Island of New Zealand. The trial, carried out in conjunction with Agrecovery, has proven successful and is moving forward into a commercialization phase, which will see used dairy rubberware diverted to be used as a feedstock for heat production in the production of cement. On a social side, very clear goals exist around Health & Safety, which is zero harm. We continue to maintain good processes, culture, and focus across the group.
Our total injury rate shows that we must continue to get better as we continue to suffer both medically treated injuries and long-term injuries.
Lost time.
Lost time injuries, sorry. Working arrangement flexibility continues to be a lever in retaining and attracting talent to Skellerup. The premise of this is that arrangements need to work for the business and for the employee. On the board, the board remains unchanged and is a highly valued mix of excellent skills, experience, and tenure. Graham will now provide a future view of the group. Graham.
Looking ahead to FY 2027 and beyond, there is no change in our fundamental business strategy and model. We continue to see this as scalable and a platform to deliver ongoing growth. In that regard, we remain focused on precision engineered products for demanding applications. The opportunities we have in the markets and application areas we are focused on, when we have conviction, we can overcome the impact of economic cycles. Although, of course, we are not completely immune to these. We have been investing in maintaining our expertise in our fundamental strengths of over and co-molding polymers with other materials. The technical capability to perform these functions, including integrating more of these to give a higher value solution and proposition for customers. We continue to build those teams, and as I touched on earlier, we have been investing in manufacturing modernization and capacity in our facilities.
An important thing I wanted to stress also is investing in our market presence. More than half of our people are based in international markets, and we are carefully expanding our teams in the markets that we are strong. The guiding factor for us in terms of making the decision to add more personnel in is often ensuring our leaders and teams can support them to assure and accelerate their success in roles. We are selling technical products, and it is not just a case of having another body to rock up into a customer and offer that solution to a customer. We are also expanding our presence in markets where previously our direct presence has been smaller, including China and Europe.
For example, in the dairy space, we have set up our own small team in China now to capitalize on the opportunities we see there, and we are looking at adding some further personnel in Europe in that regard. Just a reminder, our business is a mix of OEM customers where we supply key products and components of brand, but also branded products. For OEM customers, we are focusing on deepening our relationship with existing customers and widening our reach with new customers in the application areas where we have strength. For branded products, we are privileged to have some long-established and well-regarded brands, which provide us with the opportunity to carefully leverage for growth. You can see some images at the bottom of the page here, and some of those may be familiar to you.
On the left-hand side there is a product, as I look at it, that we call the Battleship, which is going onto tile roofs in the U.K. We have just launched that product, and that provides a really effective way for, particularly around solar installations, for cable entry into the application. Alongside that is a check cartridge that we released or began to manufacture this year for a large OEM customer in the U.S. It is cleverly provided to them inside a sleeve that you can see in the image here, to make for an easy installation as both a new product, but also as a replacement product in heating and water control behind the wall in the U.S. for large residential and commercial buildings. Alongside that is the Thriver, which is our calf-feeding teat that we launched in FY 2024, FY 2020. Sorry, beg your pardon, FY 2025.
In FY 2026, as the results went to plan, and we have doubled our revenue from sales of that product, both into domestic and international markets. We continue to see significant opportunity for this product range because the nature of the product differs by the markets that we sell it into. So it is a slightly different product in the U.S., and again, opportunities to customize that for the European market. In the middle there, we have the first of our shingle roof deck-type products that we have launched in the last quarter of FY 2026, which will provide good opportunity for us going forward. Alongside that you see a milking liner that has just been launched into the U.S. market, loaded in a recyclable shell. Alongside that, another pretty technical-looking product that is supplied into the U.S. to an OEM customer that is used as a seal in gas regulation.
On the far right-hand side, there you see the Mio boots that we recently launched during the final quarter of FY 2026. So that is our first foray, if you like, into the lifestyle market in New Zealand. That has been a successful launch for us. We have just taken delivery of further product because naturally when you launch a new product in the market, you enter cautiously and do not build too much inventory in advance. We probably should have built a little bit more. So that product has gone well for us in the New Zealand market, and we will launch that into the U.K. in the autumn this year, the Northern Hemisphere autumn. So realizing growth, as is evidenced from discussions we have had in the past and what I have just noted there, and maintaining our increasing share depends on consistent high quality and delivery.
It is a pretty easy-to-understand concept and arguably harder to differentiate with. Something that was really notable to me through our business planning sessions this year was our leaders attributed to some extent, the growth of our business being linked to these simple and critical business essentials: consistent quality, reliable delivery. We will not lose sight of this. Ultimately, to pinch a phrase of one of our directors, growth comes from people and products. We have a very good team, and we are developing and manufacturing very good products, and we will continue to invest in doing this well. Move to slide 12 just to close. A question I was asked a few years ago was how people should think about Skellerup growth prospects, and was GDP growth plus some delta a way to think about that.
I thought it was helpful just to show, this graph shows the increase in our EBIT through the past seven years, FY 2020 to FY 2026, versus GDP growth for our key markets, and shows that our EBIT growth, on a cumulative basis, is well ahead of GDP growth over that period. We are focused on continuing to design and manufacture great products to deliver excellent returns for shareholders. Thanks for listening. We will take some questions. As Tim noted earlier on in the presentation, there are some additional slides which will give you some further context around the results. Tim, over to you. Who are we going to go with first?
I think Rob had his hand up first pretty much as soon as he joined the call. Maybe Rob, if you want to unmute your mic and go ahead.
Thanks, guys. Morning. Congratulations to both of you and the wider team on what is a really good result.
Thank you.
Thank you.
First question is on revenue growth. It looks to me like the constant currency year-on-year revenue growth was about 7% in the first half, and that maybe accelerated to something around 9% in the second half. Could we talk about the drivers of that acceleration and how sustainable it is?
Yeah. In the first half of the year, Rob, you will remember that the Agri result was in part boosted by a change in Incoterms. The Agri revenue was the fastest-growing division in the first half. In the second half we had a stronger contribution from the Industrial Division. 7%, 9% are pretty similar rates of growth. If you look at our revenue growth over a reasonable period of time there, over a seven-year period, we have been at around about a compound annual growth rate of 7%. For the preceding seven years, it is clear that the Industrial Division has grown at a faster rate than Agri.
As we have highlighted in the last couple of presentations, we think with the portfolio of products and customers we have in the Agri business now, that there is an opportunity to grow that at a faster rate going forward than what we have historically. It is always difficult to sort of put a number on it. I think probably the best way to characterize it is we have talked about this goal of maintaining our compound annual growth rates for earnings of around that sort of 11%-12%. We talked about how we would need to have a slightly bigger contribution from revenue going forward to achieve that, and I think that is one of the things we have achieved in this year.
No, that's great. I guess what I was highlighting, as you say, they're similar numbers, but it's pleasing to see an acceleration and hopefully bodes well for the year ahead.
I think, Rob, we highlighted in there the demand across the board in the Industrial Division has been strong. So potable water, wastewater, and that's both existing products and new products. Our foam products in the Sport & Leisure sector. Roofing & C onstruction, we actually had a revenue reduction in the North American market for Roofing & C onstruction in FY 2026, which was the first time in a number of years. We would expect to certainly reverse that trend in FY 2027.
Maybe put another way, you're not seeing things. Are you seeing things slow down in FY 2027 to date, or it's pretty similar to the second half?
Well, early days. Early days. We're six weeks into it. No, we haven't seen anything. It's trading as we would expect. For example, in the dairy sector, there's a seasonal high in New Zealand which runs through that sort of May, June, July period, so we're seeing normal tapering off there. We continue to see strong demand in our North American markets and international markets across both dairy and industrial applications. So, we're seeing things pretty steady as she goes in that regard. No material change.
Cool. That is awesome. Apologies, it cut out a little bit when you guys were talking about there was this fire in Wigram.
I think you said you had a few lines down in FY 2026. Is it right for my takeaway to be that there might be a boost to the growth in FY 2027 from those lines coming back online, or is that not really a big deal?
No, not at all, Rob. We ran two identical lines, and we used to run product down each. Both lines used to run for roughly three days a week, a mix of products, et cetera. Both lines were down for a period. We did not lose any orders at all. We managed to meet all customer orders through FY 2026, and we are now running full noise on the single line, until the replacement line arrives in FY 2027. We do not see any revenue growth of that product line at all.
Yeah.
We lost nothing in FY 2026 outside of organic normal growth.
Yeah
We don't expect to see a sort of catch-up of demand, per se.
Yeah, I think there was an interruption for a short period, and frankly our people did a superb job to get operating again on the alternate line, and essentially run that line at a higher intensity, and maintain all the business. So, there wasn't a dip in revenue that will be offset and recovered in FY 2027. All other things being equal, it would be similar, notwithstanding we're always targeting opportunities to grow, obviously.
Got it. Could you just give a high-level overview of your assumptions for the impact of tariffs and refunds in FY 2027?
FY 2027, as you know, we've moved on to a 12.5% tariff regime under, I think it's called Section 103, across all of our markets. That's substantially lower than what we were facing at this time last year. What we think is, through the good work of our teams in-market, both through price increases, cost out activities, and the launch of new products at better margins, we think the impact of tariffs in FY 2027 will effectively be fully offset by the activities that we've taken. On the refund side, yes, we've submitted all our refunds for the IEEPA, the tariffs, under the strangely named CAPE Portal. We've started to receive some of those refunds. It's very hard for us to speculate when we'll receive refunds, if we'll receive refunds. We understand certain of the refunds are being challenged through the courts still.
I think it is quite hard for us to speculate what that number is going to be in FY 2027.
No, thank you very much.
The most important thing, Rob, is okay, the tariffs have just gone up a little bit again, obviously from 10%- 12.5%. Remembering that on our products manufactured out of China, there were already tariffs from the first Trump term which we interchange, so we are paying tariff at a much higher rate than 12.5% out of that market. I think the most critical thing is when we sat here six months ago, we said, "Hey, we have made good progress in mitigating the impact of those tariffs." Then just after our half-year release, there was a reduction in tariffs. We enter FY 2027 whereby, as Tim said, net-net, we believe the tariffs that have been imposed in terms of where they sit now, we have offset the impact of those with pricing changes and cost reductions.
Pleased to see. Thanks for your time. I will slip one more in, if I may.
Sure.
Sure.
Just putting all that together, it sounds like you might be broadly comfortable with FY 2027 consensus.
FY 2027 consensus, yeah, that's fine. If we weren't broadly comfortable, we would need to tell you otherwise. Yeah, we're broadly comfortable with the FY 2027 consensus.
Cool. All good. Thank you both for your time.
Thanks, Rob.
Okay. I think Rohan, you might have been next.
Sorry, just getting the IT working. Thanks, guys. Yes, I don't know who put their hand up in what order, but just a couple of-
Oh, there's a dispute.
No, there's not. Rob would definitely beat me to it. I was battling to find out where the raise button was. Anyway, that's completely off topic. Just thinking about next year, can you give us some color on, I guess, new product cadence and range expansions that come through? Obviously, Thriver being a key one there, launching U.K., U.S. Europe, at some of these other Evolution and Reflex, et cetera. Can you just maybe give us when they're expected to drop and the level of sales that maybe we should be thinking about for those?
Yeah. I think there is a couple of ways. As always, with Skellerup, you need to break it down a little bit. From a dairy point of view, we talked for some time about the launching of milking liners preloaded in a shell. Throughout FY 2026, we sold a silicon liner that came preloaded in a shell. That is not a significant contributor. In the latter part of the year, in the final quarter, we began to, if you like, soft launch a rubber liner, one of our RST-Driver+ liner in a shell. The reason we went slowly with entrance into market is making sure we have got enough product to support the demand.
I think Tim said to me earlier on today that it was about three quarters of a million dollar worth of sales in FY 2026 that came from liners preloaded in a shell, as another way that we are participating in the market. We would expect that to grow pretty strongly in FY 2027. That will cannibalize some of our pure liner sales. Incrementally, we expect some growth there. That is mainly focused on the U.S. market. We have grown sales into the European market. We have traditionally really had a primary focus on OEM customers over there. We see the opportunity to sell more of our own branded products into the European market, and that is under the likes of the Reflex brand that I highlighted there. That is a more mature brand in our portfolio.
The Thriver product, obviously, we have had that product in the New Zealand market for a couple of years now. We are running trials in North America, and the feedback is excellent. It always seems to take a little bit longer than perhaps you might think for the trials to conclude. We are really ready to push with that product more substantially in the U.S. now. Again, now that we have finalized those trials and have a well-performing product, we need to build up our tooling capability to make more volume. Good prospects for us to, I think, sustain the improving trend in growth through the Agribusiness, through the dairy side of things. We highlighted from a footwear point of view that we have launched our first lifestyle product in the New Zealand market. That will take some time to build share.
We also see good opportunity for that in the northern hemisphere with an initial focus on the U.K. We are putting a little bit more time into international markets for footwear because we think there is good opportunity for us there. We have actually appointed a sales manager in the U.S. to take a lead on that. We have had some people in market in South America. That will take time to build and we hope that when we talk at half year, we will be able to talk about prospects for some improving growth from footwear in the second half of the year. On the Industrial side, it continues to be a lot of our business, as you know, is OEM based. We continue to have good opportunities with customers to maintain the sort of cadence of revenue growth that we have had.
We are pretty pleased with some of the product innovations that we have launched in the U.S. and the U.K. to give a bit of an impetus to growth in our roofing construction sectors in those markets.
The U.S. roofing project that you had underway, is that still planned to be launched?
Yes. What I was referring to there, Rohan, the discussion was there is a couple of things we plan to launch, a range of shingle roof deck tiles. We had traditionally stayed away from the shingle roof market. We had a couple of customers that were very keen for us to develop a range for that market. When tariffs were jumping around pretty wildly, we proceeded with caution to make sure that we were going to be able to launch a product and generate good margins out of it. Basically, what that meant was that we pushed out the launch of that product till very late in FY 2026. Actually, very recently, we have secured orders which should begin to come through for that product from one large customer in Q2 of FY 2027.
We have some other products that we are pretty well developed with in the U.S. market now as well, which we plan to launch during the year. I think that can provide a good stream of growth for us over the coming two to three years.
Thanks for that color. Just looking at the exit run rates on margins, you talked about record production volumes in your equipment and Agri, but your margins were similar to last year. I think you made 10 basis points out of record volumes. Can you just give us some color around why maybe those margins weren't as strong as maybe they could have been given the volume increase?
Yeah, two factors. Obviously, Agri is a combination of dairy and footwear. Our margins were lower in footwear in the year we just completed because we did have higher raw material costs. We knew that was coming. We'd anticipated that. On the dairy side, of course, we've had some pretty substantial increases in raw material costs. A lot of our dairy products utilize synthetic rubbers and a bunch of other materials, and prices rose pretty steeply for those as the Middle Eastern crisis began to impact. Our primary focus was making sure that we could source all the materials that we need. The team did a tremendous job there. When I was speaking to Dino in April, we had some concerns over where we might be in the June, July period.
We there was a bit of tightness there with a couple of materials a few times, but we're in much better shape now. The work we've done to secure alternative lines and having the capability to rapidly reformulate. Frankly, some of the supply lines that were constrained have restarted, for example, in Korea. But we did see some increased raw material costs impacting that business. Yes, we can obviously look to pass that on with price, but those things never happen in exactly the same sort of linear fashion. We've been investing pretty heavily in our development resource, both from a technical point of view and in market. I mentioned we've assembled a small team in China to give a growing emphasis into that market.
That takes a little bit of time to translate into contributing the amount of earnings commensurate with what we ordinarily do.
And then likewise for Industrial, it looks a pretty strong step up in the second half. The first half I think was 20.5% at EBIT and 22.5% in the second half.
Yeah, it really spiked. Really spiked.
Is that sustainable? Because that's more linear. Historically, Agri's kind of been a bit seasonal, first half, second half. This is one that's kind of linearly growing. Is there anything in there that's one-off as well, like currency or something like that?
There's a little bit of currency benefit in the Industrial Division result.
In the Industrial Division
for the second half, yes, because the Kiwi dollar weakened and our hedging is really tagged towards the Agri Division because that is where our largest net exposure is. There is a little bit of currency helping the Industrial Division in the second half. But in general, there is always a question of what is your product mix like. We have some products that generate higher margins than others. There is a little bit of mix going on in there as well. Then frankly, I think we did a good job. Not me, but our team did a good job with the speed at which we are able to implement pricing changes, and we are able to manage around our cost increases in the Industrial Division. So I think the EBIT percentage we achieved for the full year is probably representative of where maybe you should anchor your expectations going forward.
Cool. Thanks. And then last one. Sorry, I have taken a bit of time here. But balance sheet has got zero debt effectively.
Yep.
Can you just give us some color on CapEx? Do we still need to maintain this higher level, given we have got a line to rebuild with insurance proceeds? Also, was there any suggestion of maybe a small special dividend, given the headroom you have got and the cash generation you are making?
No, we didn't give any consideration to a small special dividend. Of course, our imputation rate is at 40% because a greater proportion of our earnings increasingly get generated overseas. We do plan to continue to invest at a rate that's higher than it was two or three years ago in building and modernizing our manufacturing capacity and in product development from some of our own branded products. The level of CapEx you saw of NZD 15 million for the group in FY 2026, at this stage, we anticipate being a little bit lower than that in FY 2027, but that's nearer where it was than if you go back four or five years when maybe we were at less than NZD 10 million. It's got to be closer to NZD 15 million than it is to NZD 10 million. Then we continue to be alert to opportunities for acquisitions.
We continue to evaluate the merits of expanding our manufacturing capability in market, particularly the U.S. But we're proceeding with the caution you'd expect us to do so in that regard. Hopefully that answers your question.
Yeah. Plenty. Thank you. I'll let someone else hear this.
Thanks. Yeah, it was Adrian. Adrian, yep. If you want to unmute yourself, Adrian.
Oh, good day, guys. How you going? Sorry. I couldn't work out how to raise my hand.
It's okay. We saw your comments in the chat.
Oh, okay. No worries. Hey, the question I've got is just when you enter your annual planning cycles, how many years of duration do you have conviction in the required growth rates that you have been achieving before you have to start coloring in either additional activities or stuff to bridge any gaps?
Yeah. It's a difficult one to answer in some respects. Our emphasis in our planning cycles is on a three-year view forward. It kind of is different across all of the businesses. The strongest emphasis is always on what you can see, but in terms of a direction, if you think about the Agri business, for example, on the dairy side, we've been clear that we've got multiple vectors and opportunities for growth. We're taking a stronger presence in market in China, for example. They produce as much milk as New Zealand does, but our share of the China market is substantially smaller than what it is in New Zealand via our OEM customers and our own brand of products. When we think about how do we sustain growth, we've got plenty of opportunity from investing more in market access.
We see further down the line opportunity in other emerging markets where there's massive amounts of milk being produced, likes of India and Pakistan, for example. To answer your question, we're not searching around to say, "Hey, what else can we get to kind of sustain the growth rates that we've got?" As I said, one use case example there for dairy, we see ample opportunity with markets, and we see ample opportunity with farmers increasingly focused on productivity, and being able to measure that. So producing products that deliver better outcomes, producing more integrated products. We started with a liner in the shell. You've heard us talk about cluster developments and what have you as well. So, a product extension and a market extension from dairy as an example.
From an Industrial point of view, if we kind of maybe focus on the two biggest areas, potable/waste water and Roofing & Construction, we see strong opportunities for us in North America with some of the product initiatives that I talked about previously there with Rohan, and with Rob. On the potable water space, it's interesting, it was actually two years ago at a business planning session, we have a really strong market share with a couple of customers, for example, in pipe and in tapware. But there's a bunch of other customers in those applications where we don't have any position. That's an obvious area of opportunity for us to focus on without having to go and dabble into other applications where we don't really have an understanding.
We've put a little bit more resource into that team so that we can have the opportunity of both going deeper with those existing customers and work to try and gain a position with customers we don't currently have one of the applications where we have a strong understanding of the needs.
Okay. If I was to summarize all that, would it be fair to say that you've got reasonably high conviction on a three-year cycle and at the required rates that the market's expecting, and if you tracked back over the last seven years, which you've provided in your presentation, would the track record support that? If you went back three years and looked at your forecast, then would it be pretty close to that? I mean, accepting that the world varies a lot year to year in your markets. Just to give us a sense of your process.
Yeah. So track record over the past couple of years has been pretty good in terms of realizing what we've set ourselves the target of. It's interesting, when people plan their businesses over a three-year term, once they get out to those later periods, their quantification sometimes, some are a little more cautious and some are a little more optimistic. But certainly the realization of our near-term plans has been pretty good. I think increasingly, the detail around our medium-term plans in terms of what we're going to do and ensuring we resource it is good. Quantifying it's always a little bit harder. If it's a project-by-project basis, you tend to get into more detail for it then.
But to answer your question, our delivery against our plans has been pretty good over the past couple of years, which is one of the reasons why we have conviction that we can continue to sustain the sort of compound rates of earnings that we have. We feel like that we think we can accelerate what that is over a longer period of time with Agri, which traditionally had a slower trajectory of earnings growth than Industrial.
Okay. No, that's good. Can you just, I guess particularly in Agri, as you're sort of entering into the I guess entering into a slightly different channel against your OEM supply with your branded stuff, can you just give us a little bit more detail how you're doing that, or how you're sort of cautiously kind of testing that and sort of supporting it with evidence?
Well, I think in North America we've got the dual channel that we have for a long time with our own branded product and with OEMs. The important point is with our own branded products is making sure what we're pushing into the market is something that's differentiated, and brings a different value equation, rather than perhaps if you go back 10 years, a lot of our branded products look pretty similar in a copy-type product of OEM customers. Certainly our product development for our own branded products is focused on higher value, higher productivity products, which means we can much more comfortably operate in market alongside our OEM customers because they don't perceive that we're out there copying their IP and putting a Skellerup label on it to compete with their product. So it's important that our development focuses on differentiating products.
Okay, good. Thank you, guys.
Thanks, Adrian.
Thanks, Adrian.
Further?
I have not seen any other hands raised or questions in the chat. We've probably got another five minutes or so to run if anyone else has any questions. Otherwise, might wrap it up.
I think we'll leave it there. Thanks everyone for joining. Appreciate your time, and we look forward to talking again soon. We're very pleased with the result for the year and in particular, the contribution of the Skellerup people across the world. Thank you very much.