Chairman's address

9 Nov 2008

Before moving the adoption of the Accounts and Reports, I would like to make some brief comments about the company and its activities.


I am pleased to be able to report that the year in review, despite the tough trading environment, has been another sound one for the company.

The Company generated a net profit after tax of $27.77 million, a decrease of 10% when compared with the previous year. This was earnt on revenue of $466 million, which although up overall, when the full year impact of the contribution from the new stainless operation is taken into account, was similar to the previous year.

The Directors declared total ordinary dividends for the full year of 29 cents per share fully imputed.

This performance was achieved in a year in which each of our key market segments was influenced by Reserve Bank actions to slow the economy, and by the appreciation of the NZ dollar.

The housing market resisted attempts to slow it down, but the level of commercial construction, which is more important to us, was flat.

The manufacturing and rural sectors were hampered, particularly by the high NZ dollar.

Our results reflect our present position as a mature industry player with strong positions in its markets, and much dependent on the performance of the economy in its particular sectors.

It is this situation that I would like to talk to you about.

The board and management as part of our strategic review process have agreed that we should give additional impetus to our growth activities, and that, as well as operational improvements and organic growth, we should actively pursue acquisition opportunities.

As one of the actions taken towards this objective, the management restructure implemented during the year provides for clear management focus on the business streams as well as enabling the Company’s Chief Executive to expand our growth options.

The board has confidence that the company can build shareholder value in this way, and is encouraged by its track record, including the recent acquisition of the stainless steel business. This operation has been seamlessly integrated into the group, and is producing results considerably in advance of our original expectations.

We expect that our horizons may be broadened, and believe that our skills, distribution networks and customer base will provide opportunities for us in other metals and products.

Turning to other matters, we have been implementing a significant property and facilities upgrade program, all of which has been delivered on time and to budget. You will be able to see some of the results of this good work later in the meeting.

I am delighted that the Company has continued to improve its safety performance. Everyone in Steel and Tube takes the safety and wellbeing of our people very seriously, and management with the board’s support has continued to upgrade systems, standards and training to the extent that the company can be proud of the way it compares with international performance measures.

We also know that this is a never ending pursuit.

I will leave more detailed comments about the operating environment to our CEO, but I want to express confidence in the ongoing success of the Company. The long term picture is a very positive one.

The steel industry globally seems to be in a period of high demand, with China having most influence but with the rest of the world contributing, so that we expect world steel demand growth to remain around 6% a year for the first time in many decades. This is likely to keep upward pressure on prices, but we expect ongoing volatility.

On behalf of the Directors I would like to acknowledge the contribution by Nick Calavrias and his management team, and that all of employees.

I also wish to thank my board colleagues for their support.

In summary, I believe that the result for the 2006 /2007 year, although less than last year was a sound result given the trading conditions.

International steel demand provides a positive global environment, there are some signs for improvement in New Zealand market sectors that have an impact on the company, our management team and our infrastructure have been strengthened and we have a clear strategy that is intended to increase shareholder value.

The picture painted by Nick in his presentation reinforces the importance of our increased focus on growth options for the Company, and the potential value of the actions we are taking in this regard.

We go forward with confidence.