Performance
During the year to 30 June 2012 the Company delivered a pleasing performance in what was another difficult year and perhaps more challenging and complex than the previous year.
Demand across all key sectors remained subdued, and the momentum of the expected Christchurch rebuild activity, although improving, continues to experience delays, restricting steel demand to levels marginally above the prior year. These factors have led to an intensely competitive trading environment.
Therefore, it is pleasing that sales increased by five per cent to $405 million. However, profitability was lower at $13.1 million, a reduction of 23 per cent, primarily due to increased competitiveness within the industry.
Operating cash and the balance sheet remain strong, and a final dividend of 6.5 cents increased the full-year dividend to 12 cents a share.
The Company’s commitment to the safety of all of its employees, contractors and site visitors remains a high priority. Increased health and safety resources provide greater support for safe, front-line, operations.
The Board is pleased with the leadership under Dave Taylor and his Executive Management Team.
Reinvigoration
The reinvigoration programme of change has achieved substantial progress. One Company fully integrates the organisation to ensure our core values and end-to-end customers’ needs are central to all day-to-day behaviours and outputs.
The One Company approach is becoming embedded within the business and new areas of focus are underway. Staff have clearly-defined performance expectations as well as up-skilling opportunities to meet our customer-centric focus. The Company’s strengthened brand and culture, underpinned by the values and the by-line ‘stronger in every way’, continue to gain traction both internally and externally.
One Company lays out a strong vision for the future and we are pleased with how the entire programme is increasingly benefiting both our customers and the business.
This year has also seen the implementation of the first stages in a major transformation of the Company’s supply-chain function. We have introduced a nationally-integrated, whole-company approach to our supply chain. Although it is early days for the new model, we are encouraged by the progress in what we are seeing. The goal is to deliver greater cost efficiencies whilst providing better product accessibility and options for our customers throughout New Zealand.
Arrium Divestiture
Clearly, a significant development in recent weeks has been the change in shareholding ownership.
Australian-based Arrium, formally known as OneSteel, sold their 50.3 per cent majority shareholding in Steel & Tube on October 9th, 2012.
It was becoming increasingly clear that Arrium’s future and, therefore their investments, lay in resources and the mining sector. Consequently, they have elected to reduce non-aligned investments.
The Board wishes to acknowledge the leadership, the legacy and the value Arrium has contributed to Steel & Tube. Arrium began its association with our Company in 1985 through its earlier history as Tubemakers of Australia, then BHP Australia and then OneSteel, which became Arrium earlier this year. We greatly appreciate the benefits gained from their connection, which have helped us to evolve into the modern company we are today. We wish Arrium well in their future quests.
Arrium remains one of our key suppliers and we look forward to this continued relationship.
In today’s market, we believe the divestment is a positive development and in the best interests for Steel & Tube.
The majority of the shares on offer were acquired by a range of leading New Zealand-based institutional investors. The remainder were taken up by predominantly New Zealand retail investors.
From a strategic perspective, the changes to our share ownership will enable the Board to have more flexibility in setting our strategic direction.
Overall, I am confident the change in ownership is in the best interests of all shareholders and coupled with the re-entry to the NZX 50, I believe these are indeed interesting times for Steel & Tube.
Board of Directors
As a further result of the ownership changes, Dean Pritchard resigned as Chairman on October 9th, 2012. However, he continues as a director and I, along with the other directors, am most grateful to Dean for his decision to remain on the Board. Dean has been Chairman for seven years.
I would like to thank him for his leadership, particularly during one of the most challenging, economic-rollercoaster periods in modern times. Dean’s extensive industry experience and knowledge about Steel & Tube is invaluable to us going forward.
As a consequence of Dean’s decision to step down as Chairman, the Board elected me as the new Chairman on October 10th, 2012. I was elected as an independent director on the Board last November and it is my privilege to now hold the position of Chairman.
Steve Hamer, Chief Executive of OneSteel Distribution and an Arrium-appointed director, stepped down on October 9th, 2012. Steve was appointed as a non-independent director to the Steel & Tube Board on November 10th, 2011. Steve has contributed greatly to our Board and I thank him for this. A search for a replacement director is currently underway.
Both Dean Pritchard and Rosemary Warnock were Arrium non-independent appointments to our Board. They remain as directors and are now considered independent directors. Their industry knowledge and expertise, combined with their understanding of and commitment to our Company, are of enormous benefit to us. I am especially grateful to both Dean and Rosemary for their decisions to continue.
In line with our constitution, Rosemary Warnock, as well as independent director, Janine Smith, are due for retirement by rotation. I am pleased to affirm both Rosemary and Janine have made themselves available for re-election, and they are before you today. This will be addressed later in the proceedings.
The changes for the Company will create greater interest in Steel & Tube from the investment community.
Rejoining NZX 50
And, just last week (7 November) the New Zealand Stock Exchange announced Steel & Tube is to re-enter the NZX 50 as from today. This is because of the change of ownership of white-ware company Fisher and Paykel Appliances Holdings Limited (FPA) and their subsequent de-listing.
Earlier this year, as a result of changes to the way NZX calculated the NZX 50 listing criteria, Steel & Tube lost its NZX 50 status, based in part on the value of a listed company’s market capitalisation, after discounting majority shareholdings. Due to Arrium selling its majority shareholding in Steel & Tube last month, we were once again ranked in the top 50 companies on the New Zealand Stock Exchange by market capitalisation.
Unsolicited offer to Steel & Tube Shareholders
In recent weeks some of our shareholders will have received an unsolicited offer to purchase their shares at a discounted price. These offers are sometimes referred to as ‘low ball offers’ and have received much attention on both sides of the Tasman during the last few years.
The company involved on this occasion is Stock and Share Trading Company Ltd and we understand the offer was to some smaller shareholders with an offer price of $1.00 per share.
As Chairman, I contacted all Steel & Tube shareholders directly by email or letter to advise the Board’s position in the event an unsolicited purchase offer was made. Our advice included a caution to seek independent professional advice before accepting any offer. Such offers as this are often less than could be realised by selling the shares via a share broker on the NZ Stock Exchange (NZX). The Board also recommended shareholders compare the offer being made with the latest traded price of Steel & Tube Holdings available on the NZX website or in daily newspapers.
Outlook
As we indicated in our results announcement released in August, it remains difficult to form a clear view of the trading landscape even over the short-to-medium term. Sovereign-debt issues in Europe continue. This in part is a contributor to the decline in China economic activity, which in turn is reducing commodity prices in the Australian resources sector. All of these factors are inextricably linked and result in on-going, global uncertainty. Naturally, this impacts and influences the economy and business sentiment here in New Zealand.
Our key markets continue to remain flat with the noticeable exception of Christchurch, which is slowly gaining momentum and our business is well positioned there.
In summary, the Board continues to be encouraged by the transformations taking place. Although the immediate results may be masked by the difficult trading environment, the Company is certainly becoming ‘stronger in every way’ and is well positioned for the future.
Before handing over to Chief Executive Officer, Dave Taylor, for his presentation, on behalf of the directors I would like to thank Dave and all of Steel & Tube’s employees, based throughout New Zealand, for their continued commitment and support.