For the half-year ended 31 December 2014
Steel & Tube’s results for the six months to 31 December 2014 reflect strong growth. We continue to demonstrate earnings and revenue momentum while making significant investments in facilities, plant and connectivity to improve the customer experience.
This sustained success is underpinned by hard work, an ongoing programme of significant operational change and our S&T Stainless acquisition, which continues to perform in line with our expectations.
Continuing through another year of robust earnings growth signifies Steel & Tube’s ability to deliver sustainable results to our shareholders combined with enhanced capability and customer experience.
Results
The trading result for the six months to 31 December 2014 is a profit after tax of $10.8 million.
This is an increase of 35 per cent compared with the same period last year, and is consistent with expectations.
Sales have increased by $46.5 million, or 22 per cent, to $258.2 million on improved volumes and margins.
Net operating cash flow improved by $12.6 million to $10.1 million, despite a minor increase in inventory that reflects the increased sales activity.
The half-year result includes the contribution from our April 2014 acquisition of S&T Stainless for the full period, and comes on the back of improved markets, even though growth in those markets moderated throughout the first half.
The net tangible assets per share at 31 December 2014 were $1.58 compared with $1.56 at 31 December 2013.
Dividend
The Directors have declared a fully-imputed interim dividend of 9.0 cents per share to be paid on 31 March 2015, to holders of fully-paid ordinary shares, registered at 20 March 2015. The amount payable is $7.96 million and a supplementary dividend of 1.59 cents will be paid to non-resident shareholders.
Performance
Globally the steel industry remains challenged and within New Zealand competition is intense. Against this background Steel & Tube has enjoyed a buoyant first half which has seen our business improve, further cementing our place as a recognised leader in the industry.
The acquisition of the company now trading as S&T Stainless has enhanced our nationwide footprint of 48 distribution and processing centres, and created a strong platform from which we can support the unique needs of local businesses and the sectors they serve.
We continue to make good progress with our ongoing business improvement initiatives. In November we opened the first of three purpose-built facilities as part of our $30 million re-investment programme. The new Palmerston North site now houses our Processing, Distribution and Stainless operations, offering easy access for customers to the wide range of products all under one roof.
Commissioning of a new facility commenced and another facility currently under construction in Auckland will enhance processing capability, enabling us to better service the North Island’s expanding building and construction requirements, underpinning our strength in the manufacturing sector.
New digital hardware currently being rolled out across our sites is set to strengthen communications capabilities and enable faster, real-time interaction among staff and customers. In addition, we are completing the first phase of planning for a new enterprise resource system (ERP) which will further strengthen the customer experience.
We continue to secure significant contracts, providing tangible evidence of the diverse ways in which Steel & Tube works collaboratively and creatively with customers to support the economic growth and development of our cities, towns and communities. These include:
- Auckland’s Waterview Connection
- Christchurch’s Burwood Hospital
- Central Plains Community Irrigation Scheme
- Govett Brewster Art Gallery, New Plymouth
- The Waiarohia stream Bridge in Whangarei
Our health and safety performance remains strong and consistent with recent years. Improvements in near-miss reporting and root cause analysis continue, enhancing the safety culture that underpins all our operations.
Outlook
Against a global scene of increasing geopolitical uncertainty and financial market volatility, the New Zealand economy continues to advance.
As anticipated, construction has underpinned much of the activity and though this is likely to plateau, those parts of our business aligned to the sector are expected to continue delivering strong results.
Pleasingly, manufacturing is steadily improving and we are encouraged by the latest data which indicates the sector is benefiting from a weaker dollar, along with pull-through from other sectors.
Rural, however, is somewhat varied. Long-term investments in dairy and food processing continue and are assisting those parts of the business aligned to these sectors. The reduction in dairy commodity prices will undoubtedly see some impact on the sector in the short- to medium-term. There is some offset in that beef and sheep are enjoying better conditions.
Globally, steel output continues to increase while demand, especially within China, remains sluggish. Along with deteriorating raw material prices this is creating downwards pressure on steel prices in US dollar terms. The significant and ongoing depreciation in the New Zealand dollar, however, has more than offset this, helping to lift domestic steel prices in recent months. Should the New Zealand dollar continue to depreciate, domestic prices are expected to firm further.
Within Steel & Tube, ongoing transformation through the One Company initiative remains a priority. We continue to do this while serving our customers and supporting our people through various change initiatives.
These changes are yielding results and the company is positive about the second half of the year.
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