Steel and Tube's managing director, Nick Calavrias. FILE PICTURE / MARK MITCHELL
Steel & Tube Holdings has reported a 143 per cent rise in interim profit but says its second half result would be reduced substantially due to deteriorating trading conditions.
The supplier of steel products to the building and other industries said global demand for steel in the early
part of the year led to substantial shortages.
This caused the company to withdraw from "high volume-low margin business" and focus on higher margin products.
Steel & Tube reported an unaudited after-tax profit of $20.79 million in the six months to December 31, up from $8.56m in the same period last year.
The profit included an after-tax provision for "impairment of trade receivables" of $3.18m.
Directors declared an interim dividend of 10 cents per share, payable on March 30.
Revenue rose 11 per cent to 273.78m due to the effect of higher steel prices.
Chief executive Nick Calavrias said the company encountered variable market conditions.
Construction activity overall was down, led by a substantial drop in housing starts. Commercial construction activity did not suffer to the same extent, he said.
Demand from rural communities remained strong.
The steel supply position improved rapidly in September when demand for steel began to stall, causing a substantial build up of inventory on hand by $46m.
Calavrias said there was considerable uncertainty surrounding the extent and timing of the impact of the global economic slowdown on the economy.
Although global prices for steel are now in retreat in US dollar terms, the impact will be softened due to the substantial depreciation of the New Zealand dollar.
" In summary, we expect market conditions in the short-term to be as tough as we have seen for a very long time," he said.
- NZPA
