Home-building, Christchurch and rural upturn lift Steel and Tube 1H 10 percent

Thursday 20th February 2014

Steel products manufacturer Steel & Tube lifted earnings 10 percent in the six months to Dec. 31, turning in a tax-paid net profit of $8 million on a 6 percent lift in sales to $211.7 million.

However, margins remain tight and despite the Christchurch rebuild, booming residential construction and a strong rural sector, the company warns the steel market remains highly competitive. It held margins during the period, but improved performance came from volume growth.

Directors declared a fully imputed interim dividend of 7 cents per share, payable on March 31.

Despite improved NPAT, the company showed negative cashflow of $4.5 million for the six months, compared with positive cashflow of $1.2 million for the same period a year earlier, driven in part by a 13.2 percent lift during the period in payments to suppliers and employees, totalling $214.2 million. Customers' receipts in the period rose 3.5 percent to $216.9 million.

Cash and cash equivalents at the end of the period were negative $8.1 million, compared with a positive cash position of $2.4 million a year earlier.

"During the first half, we began to see further evidence of the beginnings of economic recovery," said chief executive Dave Taylor in a statement to the NZX. "Indicators and sentiment suggest that New Zealand may be on the cusp of a marked economic turnaround."

However, the company noted a "disconcerting" 9.9 percent reduction in the value of non-commercial building consents in the December quarter last year.

In anticipation of increased activity, the company has made "substantial investments", including new plant and equipment to boost wire processing and roofing capacity in Christchurch.

"For Steel & Tube to remain competitive, new investment and greater labour flexibility is critical," said Taylor.

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