KEY POINTS:
Steel & Tube Holdings Ltd today reported a 17 per cent fall in interim profit as the economy slowed and the high New Zealand dollar impacted on the company and its customers.
The engineering and contracting company said its $14.75 million profit in the six months to December
31 was down from $17.68m last year.
Sales increased by $6.69m to $229.49m but $16.9m of this was from a new stainless steel business acquired in April 2006.
The directors declared an interim dividend of 15c a share, payable on March 9 to shareholders on the register on March 2.
Chief executive Nick Calavrias said a slowing economy, a strong New Zealand currency and high interest rates had been expected to combine and create a volatile trading environment. And they did.
The value of commercial construction was down 6 per cent compared to last year, while the New Zealand dollar went from US60c in June to US70c in December.
"This caused considerable price volatility with the replacement cost of inventory and the high exchange rate impacted adversely on the export and manufacturing sectors," he said.
The volume of steel sold in the first half was behind the same period last year, reflecting the softer economy but selling prices and margins were slightly higher, he said.
Demand in the steel distribution and industrial products business was soft across the board when compared with the same period last year.
Volume of structural sections was affected with the downturn in the construction sector, while demand from the manufacturing and rural sectors also suffered due to the persistently high exchange rate.
The roofing products business continued its strong performance on the back of strong demand for roofing and cladding from both the light commercial construction and new residential property sectors.
But subdued demand from the commercial construction sector placed pressure on margins, affecting the performance of the reinforcing operations.
Reduction in margins and volume from the commercial construction and rural sectors affected Hurricane Wire products.
Mr Calavrias saw more of the same going forward.
"Although the outlook for commercial construction is expected to remain soft, near term and then to pick up towards the end of the year, the rural and manufacturing sectors will continue to be under pressure for the foreseeable future," he said.
The strong New Zealand dollar continues to create volatility with inventory values.
"The overall trading conditions for the second half of the financial year will continue to be similar to that encountered in the first half, with a pick up in activity expected late in calendar 2007," Mr Calavrias said.
- NZPA