By Jenny Ruth
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Friday 21st August 2009 |
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Steel & Tube Holdings's annual profit and revenue were below his expectations and management comments about the outlook were downbeat, signaling similar trading conditions continuing through the first half but expecting a recovery at some point in 2010, says Kar Yue Yeo at First NZ Capital.
Yeo says the company reported an $8 million net profit before one-offs compared with his $9.8 million forecast. Revenue was 18% below his estimate, reflecting both weaker volumes and prices.
(Steel & Tube's reported net profit rose 15.9% to $26.1 million while sales fell by $20 million to $484 million for the year ended June 30.)
Nevertheless, he is optimistic about the company's outlook.
"As trading conditions improve in the second half, we think driven by housing initially, this should be reflected in higher volume and potentially also for product prices in US dollars as global demand recovers," he says.
"We note that steel pricing appears to have stabilised in the pst three months with bar prices rising approximately 10% to 15% from their recent low."
While his 2010 forecast net profit is unchanged, Yeo has raised his 2011 and 2012 forecasts by 18% and 11% respectively to reflect some recovery in steel prices and the company's substantially lower debt.
BROKER CALL: First NZ Capital rate Steel & Tube Holdings (NZX: STU ) as outperform.
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