Steel & Tube returns to a profit, sees 'stronger for longer' activity ahead

Tuesday, 24 August 2021

Steel & Tube returned to a profit in its 2021 financial year.

Steel & Tube, which manufactures and distributes steel products, has returned to profit and says it expects activity to remain strong.

The company reported a $16.1 million profit for the year to the end of June, from a $60m loss the previous year which included a $47.6m writedown of property, plant, equipment and intangibles. It repaid all its debt and ended the year with $25m net cash.

Steel & Tube says positive economic activity is driving increased demand for steel across a number of sectors.

“Economic activity increased steadily across the year, with a strong recovery in residential construction and infrastructure activity, an uplift in commercial tenders and more recent growth in manufacturing,” said chief executive Mark Malpass. “Forward market indicators point to sustained activity levels and there is a positive market backdrop.”

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The company expects activity to remain “stronger for longer”, and said it has a long pipeline of secured contract work in place.

Residential activity was likely to ease in the next one to two years due to interest rate rises and as the supply demand imbalance slowly reduces with the borders closed, it said.

Steel & Tube said it had substantially reduced its annual operating expenses to $79.9m from $92.4m.

The company cut its employee numbers to 799, from 884 in 2020, and 1003 in 2019.

Steel & Tube received $6.6m of wage subsidies in its 2020 year.

The company returned to paying a dividend, after no dividends were paid in the 2020 year. The company will pay a final dividend of 3.29 cents per share, taking the full-year dividend to 4.5 cents, costing a total $7.5m.

Shareholders should expect continued earnings momentum and dividend flow, and the company was investigating potential capital management activities, it said.

The company’s profit margin improved to 20.4 per cent, from 19 per cent, although it was impacted by a selldown of its aged inventory.

Shares in Steel & Tube rose 1.8 per cent to $1.14 shortly after the NZX opened for trading at 10am.