KEY POINTS:
Exchange rate volatility, high interest rates and reduced consumer spending have hammered Steel & Tube's earnings.
Net profit after tax for the year ending June 30 was down 19 per cent to $22.5 million, despite revenue rising 8 per cent to $504 million.
But New Zealand's largest distributor
of steel and related products expects performance to improve next year should steel prices continue to rise and demand increase through a resurgence in construction activity.
Chief executive Nick Calavrias said the company's three main market segments of construction, manufacturing and the rural sector all suffered. Manufacturing had to contend with a strong and at times volatile currency, while the construction sector was affected by escalating finance costs and a slowdown in residential housing.
While the dairy sector enjoyed strong demand and prices, Calavrias said the rural sector was hit by tough trading conditions for sheep and beef farmers.
"The conditions prevented businesses in general from recovering the increased cost of doing business, resulting in a margin squeeze."
He said economic conditions were difficult in New Zealand and globally, as a result of the flow-on effects of the United States sub-prime mortgage problem.
"Although the construction of residential housing will continue to decline in the near term, there should be a gradual improvement in the construction sector in 2009 due to infrastructure projects and commercial activity relating to the 2011 Rugby World Cup."
International steel prices and exchange rate volatility had a significant impact on the company's results during recent years.
"Substantial price increases for input costs to make steel, such as iron ore, coal and scrap metal, coupled with an increased global demand for steel products are again pushing the price of replacement steel inventory up, he said.
"The domestic price of steel products is increasing substantially as new inventory arrives with the expectation of further increases to follow. This will assist our position provided prices and volumes do not retreat later in the year."
As long as the New Zealand economy is not adversely affected by global events, Calavrias expects the company to post an improved result next year.
A final dividend of 10 cents per share was declared.
Steel & Tube's share price closed unchanged at $3.15.