Vulcan Steel has made an immediate impact on the sharemarket since listing. Photo / Supplied
Transtasman distributor and processor Vulcan Steel made an immediate impact on the sharemarket when it was listed in its 26th year of business.
By late February Vulcan's share price had reached $9.70 (after a high of $11.01 on January 6) from its early November issue price of $7.50, its market capitalisation increased to $1.27 billion, and it had provided a significant earnings upgrade from its prospectus forecasts.
For the 2022 financial year Vulcan now estimates operating earnings (ebitda) of $194m-$204m, up from $174m-$184m or 11 per cent, and net profit of $107m-$114m, up from $93m-$100m or 15 per cent.
Revenue for the six months ending December increased 35 per cent to $463 million, and overall sales volume was up 10 per cent — in the 2021 financial year Vulcan sold 260,000 tonnes of product. Ebitda was up 71 per cent to $102.4m, and net profit rose 85 per cent to $54m.
In its 2021 financial year ending June, Vulcan had record operating revenue of $731.54m, up from $640.46m in 2020; record net profit of $64.83m, up from $28.68m, and more than doubled operating earnings (ebitda) to $129.7m. More than 60 per cent of the revenue is generated in Australia.
Vulcan managing director and chief executive Rhys Jones said he's quite enjoyed joining the sharemarket.
"It gives us more transparency and more accountability and the chance to reset the future."
Four months after listing on the NZX and Australian ASX markets, Vulcan has been named the winner of the Best Growth Strategy category at the Deloitte Top 200 awards.
Vulcan has grown from a small start-up in 1995 with six people at Auckland's East Tamaki to an Australasian leader with 29 operating sites on both sides of Tasman and employing a staff of nearly 850.
It has five divisions: Distribution, plate processing, coil processing, stainless steel and engineering steel. It supplies product not just for buildings but to every sector that needs to use steel — from mining, transport and construction to engineering, stainless architecture, medical equipment and even for slides in playgrounds.
"The industry is a bit more fun and dynamic than most people think," said Jones.
At its processing facilities, the Vulcan team cuts, drills, slits and shapes steel coils, steel plate and stainless and engineering steel for downstream fabrication and assembly — adding value to 40 per cent of its product.
Vulcan can cut out the shape of a wine vat, slit the coils to the exact width of a filing cabinet or bend a 50mm steel plate to a right angle if that's what the customer wants.
And most importantly Vulcan, with a fleet of 100 trucks, will deliver on time to all parts of Australia and New Zealand, with stock supply not being a problem.
"Our goal is to be the best practice industrial distributor — that's how we benchmark ourselves," said Jones. "Our growth strategy is based on targeting the right markets and covering all parts of Australasia.
"Our diversity and multiple segments give us resilience to the economic ups and downs between the two countries and states."
Vulcan's growth and diversification took a leap when it bought the Australia and New Zealand distribution business of Swedish stainless steel producer Sandvik Minerals Technology in 2014. Vulcan no longer only processed steel coils and plates.
It also bought two engineering steel companies, merged them and became the No 1 player in Australia. The Vulcan business has more than doubled in size in the last seven years and "the nice thing is we still get a lot of opportunity to grow in Australia," said Jones.
Vulcan is looking to add more products to its portfolio, such as roofing, reinforcing, wire mesh and rural supplies.
Its earnings growth is eye-watering. Between 2016 and 2021, Vulcan increased revenue from $300m to more than $700m; ebitda increased 270 per cent or four-fold; and net profit rose 410 per cent or five-fold.
Deloitte Top 200 judge Jonathan Mason said Vulcan's strategy emphasises organic growth arising from its Australasia facilities and staff of more than 800, supplemented by seven acquisitions over the past five years concentrated in Australia.
Both parts of its growth programme have been executed well, with annual revenue growth of 8 per cent and annual net profit growth of 38 per cent posted in the last five years.
He said steel distribution is a local business, with deep inventories and fast turnaround times required for success in each metropolitan area.
"Vulcan focuses on meeting its customer needs through adept placement of inventories and local steel processing capabilities, allowing it to post industry-leading order," Mason said.
Finalist: EBOS Group
Leading Australasian medical supplies and animal health products distributor EBOS Group has been a modest and impressively consistent sharemarket performer, producing an average growth rate in shareholder returns of 19 per cent over 20 years — and 23 per cent for the past year.
EBOS, which listed on the New Zealand Stock Exchange in 1960, cracked $9 billion revenue for the first time in the 2021 financial year ending June.
Total revenue was $9.2b, up 5 per cent; ebitda was $363.3m, an increase of 8.9 per cent; and net profit rose 14 per cent to $185.3m.
In the six months ending December, EBOS reported a 12.8 per cent increase in revenue to $5.61b; another 12.8 per cent rise in ebitda to $222.06m; and 15.8 per cent gain in net profit to $116.85m.
Martin Krauskopf, EBOS general manager merger and acquisitions and investor relations, said consistency of growth has been one of the hallmarks of the company.
"We operate in defensive growth industries such as healthcare and animal care — people are ageing and pet numbers are increasing — and we aim to get scale and be the No 1 or No 2 competitor, and grow market share.
"We reinvest our strong cash flow into new opportunities — often they are small to medium businesses that we can bolt on at attractive prices," he said.
EBOS, with two head offices in Christchurch and Melbourne and staff of 3700, is building an $80m state-of-the-art pet food manufacturing in New South Wales, and is poised for another growth spurt after it completes the $1.167b purchase of medical devices distributor LifeHealthcare by the middle of the year.
EBOS will also hold a majority 51 per cent shareholding in LifeHealthcare subsidiary Transmedic and provides EBOS with an entry in the South East Asian markets of Singapore, Hong Kong, Indonesia, Philippines, Vietnam and Thailand.
Krauskopf said the move in to South East Asia will be measured and cautious.
"We don't want to be the No. 3 or No. 4 in pharmacy wholesale — that hasn't been successful for us in the past.
"The medical devices market is less mature but the advance in technology provides a great expectation that people will live longer and growth will continue into the long term.
"That's what we like about healthcare," he said.
EBOS expects LifeHealthcare to contribute operating earnings (ebitda) of $116m to $121 million for the 12 months ending December.
EBOS captured the Australian market when it merged with leading pharmaceutical wholesaler Symbion in 2013 following a $1.1b deal.
The merger created the largest Australasian marketer, wholesaler and distributor of healthcare, medical and pharmaceutical products.
Mason said EBOS has been very relevant in New Zealand's response to Covid, devising a cool store supply chain that enabled the government to bring the Pfizer vaccine here, and is also beginning its journey to be an industry leader in environmental, social and governance strategy.
Finalist: The Warehouse Group
Soon after new group chief executive Nick Grayston arrived at the end of 2015, he knew that New Zealand's largest general merchandise retail business needed to be simplified and more customer-orientated.
A re-organised Warehouse, which includes Noel Leeming, Warehouse Stationery, Torpedo7 and the online selling place TheMarket, was rewarded with a record result in the 2021 financial year.
The group had a 7.6 per cent increase in revenue to $3.4b, a 164.6 per cent rise in net profit to $117.7m, online sales of $393.1m made up 11.5 per cent of total sales, and profit margin increased from 32.6 per cent to 36.4 per cent.
The Warehouse did warn in early January that group sales for the past five months were down 5.7 per cent or $88.8m to $1.465b compared with the previous corresponding period.
Online sales increased 105 per cent to comprise 18 per cent of the group sales but the gross profit margin was reduced because of the product mix and higher freight costs.
Grayston said when he arrived there were 21 loosely-connected businesses within the group with their own human resources, IT and buying operations.
The marketing, HR and IT systems were centralised, and the financial services business was sold.
There were 12 layers of hierarchy in the group operating "a command and control approach that was no longer fit for purpose."
Grayston cut the layers to three with autonomous leadership groups working closely with customers.
Grayston, previously a Sears Holdings and Foot Locker president in the United States, dropped the interminable 50 per cent sales for the same prices every day at The Warehouse stores.
"We put more thought into the value between prices and quality based on buying more volume, and decided to buy better.
"Staff were spending a lot of time in the stores constantly changing prices and we took that activity out so they could concentrate on merchandising and helping customers," he said.
"All of the businesses were entrenched in an antiquated stocking system and we returned to the fundamentals of designing a floor and making it flexible."
"We invested in the digital future and TheMarket is selling 2.5m items; we can ramp that up to 20m items in a controlled expansion."
Grayston said there is still more work to do on operating systems such as developing a cloud-based warehouse management system "to make our supply chain a competitive advantage."
Mason said the market had a very positive reaction to the growth in revenue and margins at The Warehouse Group, with the share price posting an 80 per cent return in 2021.
The market has gained more confidence on the Warehouse's multi-channel growth strategy in which customers are placed at the centre of initiatives and thus improving the customer experience, whether it is in-store or digital, he said.
• The Best Growth Strategy award is sponsored by 2degrees.
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