Debt-free Steel & Tube back in black with $16m profit

NZX listed Steel and Tube has issued is annual result. Photo / File

Steel & Tube Holdings is back in the black after reporting a net profit of $16.1 million, driven by a rebound in the economy and increasing demand for steel across a number of sectors in the June year.

That compares with last year's $60m loss, which was hit by the impact of Covid-19 and non-trading adjustments worth $58.1m.

Revenue for the latest June year gained 15 per cent to $480.0m while earnings before interest and tax improved significantly to $21.8m.

The company said it had strengthened its balance sheet, with all debt repaid, and had $25.0m in net cash at year end of the year, making it well placed as New Zealand re-entered a level 4 Covid-19 lockdown.

Steel & Tube announced an unimputed final dividend declared of 3.29 cents per share, taking total dividends to 4.5 cents per share.

The company said its turnaround in earnings was also driven by some strategic initiatives which delivered significant structural cost reductions.

Steel & Tube said it now had a strong financial platform to invest in targeted organic growth initiatives and market opportunities.

Chief executive Mark Malpass said it had been a challenging year for many businesses.

"Economic activity increased steadily across the year, with a strong recovery in residential construction and infrastructure activity, an uplift in commercial tenders and more recent growth in manufacturing," he said.

"We are now seeing the benefits of our strategic initiatives and particularly our investment in our people and digital technology," he said.

Steel & Tube operates across two divisions - distribution and infrastructure.

Distribution performed well with growth in sales and gross margins while operating costs reduced. Infrastructure volumes increased with gross margin improvements from the cost out programme being partially offset with competitive pricing pressure in some areas.

Increased activity had been seen in the second half as infrastructure and large commercial projects come back on stream.

The company is one of New Zealand's biggest importers of all goods by tonnes or weight.

Stainless steel, pipe and cable supports, chain and rigging, roofing and cladding, purlins, fastenings, mesh and reinforcing steel and chain and rigging are all sold by the company which supplies to the commercial, infrastructure, industrial, rural, retail and residential markets.

Malpass said Steel & Tube was seeing the benefits of its strategic initiatives -- particularly its investment in its people and in digital technology.

"We have seen improvements in all areas, with volumes, revenue and margins recovering across the year and a strong pipeline of secured work," he said.

Malpass said that since 2017, the company had cut its branch numbers from 50 to 26 and that had helped save costs. Digital web stores had been set up to encourage more online shopping, he said.

Steel & Tube employs about 850 people, down from 1007 people in January last year.

Operating costs had been cut by around 13 per cent which equated to $12.5m, Malpass said.

Steel & Tube either buys steel from NZ Steel owned by Bluescope in Australia and imports from other countries, particularly Asia.

Looking ahead, Malpass said forward market indicators pointed to sustained activity levels and there was a positive market backdrop across Steel and Tube's diversified market positions.

The company's shares last traded at $1.15, up 3 c.