Steel & Tube turns loss turned into profit, resuming dividend payments

Mark Malpass, CEO. Photo / supplied

Steel & Tube's revenue dropped because of Covid but the company turned last year's interim loss into a profit and has decided to resume paying shareholders a dividend.

Revenue fell 2.5 per cent from $232m last year to $226.3m in the half-year to December 31, 2020 but last year's net loss after tax of $37m was converted into a $4.3m net after-tax profit. The big change was because of a goodwill writedown of more than $30m in the previous corresponding period.

A turnaround in performance and the improved economic outlook supported the resumption of dividends, the company said.

"Given the turnaround in performance and the improved economic outlook, the board has been pleased to resume dividend payments with an interim dividend of 1.2cps in line with Steel & Tube's dividend policy of 60 per cent to 80 per cent of net profit after tax," it said.

The company said it had a strong balance sheet with all debt repaid and $23.9m cash in bank to support capital investment and growth strategy.

Operating cash flow increased 40 per cent to $24m.

Mark Malpass, chief executive said normalised EBIT was a better measure of performance between the two periods and that rose from $5.7m to $7.6m.

"The results of the significant efforts to deliver a turnaround in financial performance are starting to be seen, with sustainable cost reductions."

As long as Covid had no further impact, a final dividend is expected in line with policy, the company said. That assumed current trading performance and no further problems due to the pandemic.

Steel & Tube's result is out. Photo / supplied

Around 53 per cent of sales went to the construction and infrastructure sector, 36 per cent to manufacturing and 11 per cent to merchandising and other sectors. The business sells reinforcing steel, purlins, roofing, rural products, flooring and piping systems, fastenings, chain and rigging equipment and stainless steel equipment.

It noted $2.2m "savings in employee costs through the accelerated organisation restructure" lately.

Shareholders last got a dividend in 2019 when 5cps was paid for the full year.

The company employs 830 staff at its 26 locations. In July, 2019, it employed 1060 but has been significantly restructured since.

Malpass was acting CEO from September 2017 but appointed to run the business in February 2018.

"Although infrastructure and residential building has been busy, there are fewer vertical or high-rise construction projects, apart from Commercial Bay and the NZ International Convention Centre," Malpass said.

"However warehouse construction has been busy," he said, citing the company supplying materials for new Bunnings Warehouses, for Mainfreight and Woolworths.

"The manufacturing sector is 36 per cent of our revenue and that sector has been solid and expanding.

"We've identified several areas of growth in new product development and innovation and are looking at expanding into adjacent sectors," he said.