How Schaffer Corporation’s Automotive Leather Drove Growth Despite Profit Dip

Financial Overview

Schaffer Corporation Limited (ASX – SFC) closed its 2025 financial year with a slight revenue increase to $229.7 million, up 2% from the previous year, but reported a 10% decline in statutory net profit after tax (NPAT) to $24.3 million. The dip reflects a complex interplay of segment performances and external challenges, yet the company held firm on its fully franked dividend of $0.90 per share, signalling confidence in its underlying cash flows.

Segment Performance – Automotive Leather Leads Growth

The Automotive Leather division stood out as the star performer, delivering a 7% increase in NPAT to $16.3 million on revenues rising 2% to $186 million. This growth was underpinned by the launch of new programs for premium brands Audi and Porsche, which helped offset a temporary two-month sales disruption for Land Rover caused by flooding at a key aluminium supplier. Despite increased design complexity and program launches impacting margins, favourable currency movements supported profitability. The segment also generated a robust pre-tax operating cash flow of $28 million.

Delta Segment and Outlook

Delta, the group’s infrastructure-focused business, posted a modest NPAT increase to $4.9 million, benefiting from large local government projects that drove full industry capacity utilisation. However, the outlook for the first half of FY26 is cautious, with expectations of a small loss due to the completion of major infrastructure projects and a challenging industry environment. Risks include project delays and a weak market backdrop.

Property and Investment Portfolio

South Connect Jandakot, a strategic property asset near Perth, saw its valuation rise to $100.2 million pre-debt, reflecting a $5.9 million increase including capital expenditure on civil infrastructure. The estate is primed for logistics and last-mile warehousing demand, with a development application approved for approximately 36,000 square metres of buildings. Construction of the first 13,500 square metre warehouse is slated to begin in early 2026 as a build-to-lease project, funded by debt. The group’s total investment portfolio pre-tax net equity value stands at $227.3 million, or $16.73 per share, marking a steady increase over eight years despite significant dividend payouts and share buybacks.

Corporate Governance and Shareholder Returns

The Annual General Meeting saw the re-election of director David Schwartz with overwhelming shareholder support and the adoption of the remuneration report. Schaffer’s 10-year total shareholder return remains impressive at 23% per annum, with a hypothetical $100,000 investment in 2015 growing to over $660,000 by 2025, inclusive of dividends and franking credits. The company’s disciplined capital management and steady dividend policy continue to underpin shareholder value.