Why the Schaffer (ASX:SFC) share price flew 9% today

The Schaffer share price flew almost 10% higher today after the company announced its half year earnings report. We take a closer look.

 The Schaffer Corporation Limited (ASX: SFC) share price was sent soaring today after the company announced its half-yearly results for FY21. Shares in the industrial company closed the day's trade at $20, up 9.89%.

Earlier in the day, the Schaffer share price reached a new record high of $20.20.

asx share price rise represented by man holding bunch of balloons soaring through the air

Image source: Getty Images

What sent the Schaffer share price flying?

Schaffer Corporation is involved in a broad range of activities including automotive leather, paving, concrete and limestone product manufacture, and property leasing. Investors reacted positively today to Schaffer's half-year results for the period ending 31 December 2020. 

The company announced a half year net profit after tax (NPAT) of $23.1 million, up from $13.9 million compared to the prior corresponding quarter (pcp). It is worth noting that the result includes roughly $10 million in unrealised, non cash gains in the group's investments.

What's more, the increased NPAT reflected the strong performance in Schaffer's automotive leather division, which increased profits by 13% over the same period last year. The company generated revenue of $102.1 million for the period, which was up from $92.7 million in the prior corresponding half.

While the leather division performed well, revenue from group investments fell to $4.4 million. Relating to its investments, Schaffer had a pre tax equity value of $181 million, including $7.3 million in new investments and $21.6 million in cash deposits.

Finally in the company's concrete sector (Delta), revenue fell by 12%. However, while revenue fell to $8.9 million, NPAT in this sector returned to profit for the half at $1 million.

Schaffer also announced an interim fully franked dividend. The company will be paying out 45 cents per share on 12 March, matching last year's payment.

What now

Schaffer noted that the ongoing global economic uncertainty caused by the impact of COVID-19 makes forecasting difficult, along with potential volatility in key risks such as currency.

Hence, Schaffer expects second half earnings from its automotive leather division to be marginally lower than the strong first half, with its Delta division remaining profitable. Nonetheless, the company advised that the commencement of settlements at North Coogee should release cash and profits for the investments division.

On a more exciting note, there is optimism going forward that Delta will commence a large project during the second half. Civil infrastructure projects are increasing, in part due to government stimulus in response to the pandemic.

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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