Steel & Tube's profit falls sharply on weak demand

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Photo: RNZ / Nate McKinnon

Steel products company Steel & Tube’s profit has fallen by more than 50 percent as softer economic conditions led to reduced volumes and lower top line revenue.

Key numbers for the six months ended December compared with a year ago:

Net profit $5.3m vs $11.8m
Revenue $261.8m vs $315.3m
Underlying earnings $11.3m vs $21.5m
Interim dividend unchanged at 4 cents a share

The company said it was a solid result given the economic circumstances, with underlying earnings above the top end of its guidance range.

Chief executive Mark Malpass said its ongoing $5 million cost-cutting programme was “progressing well and offsetting inflationary pressures with costs below prior year”.

The company said volumes were subdued across all sectors, with revenue down 17 percent from the same period a year ago.

However, margins improved as it benefited from improved prices and cost control.

“With a strong balance sheet and proven dual pathway strategy, Steel & Tube is well positioned to take advantage of increasing activity and demand when the economy recovers,” Malpass said.

The company did not provide full-year earnings guidance, but it said economic conditions would likely be “challenging” in the near future.

Forsyth Barr senior analyst Rohan Koreman-Smit said Steel & Tube’s infrastructure division was the “stand-out” with an improvement in underlying earnings.

“Inflation pressures were well managed with operating costs … below expectations,” he said.

“[In the] medium term, pick up in government investment is expected to offset weaker business and residential investment,” Koreman-Smit said.