Vulcan Steel heads towards 30pc first-half earnings drop

Vulcan Steel reports its first-half result tomorrow.

Australia and New Zealand steel distributor Vulcan Steel is expected to reveal an operating earnings drop of around 30 per cent when it reports tomorrow, according to broker reports.

Forsyth Barr analysts expect a 30 per cent fall in earnings before interest, tax, depreciation and amortisation (Ebitda) to around $80 million due to volume declines in New Zealand and competitive pressure reducing gross dollar margin per tonne.

“Looking forward, we believe we are close to trough earnings and currently forecast improved volumes in the second half [of] 2024,” Forsyth Barr said in a report.

“Business confidence in New Zealand has improved post-election, while in Australia confidence has softened slightly but remains robust,” the broker said.

Jarden analysts said the company’s first four months of 2024 saw Ebitda down 29 per cent, driven by volumes on a per-day basis being lower in New Zealand four months into 2024 versus the previous comparable period.

Australia volumes were indicated to be stable versus the second half of 2023.

Over the first four months, Vulcan had signalled some gross margin contraction for its steel business.

“Lead activity indicators for New Zealand are pointing to some improvement in the second-half [of] 2024, while the outlook for Australia appears to be weakening, particularly for the steel segment,” Jarden said.

Jarden has retained its Ebitda estimate of $166m for the 2024 year but reduced its 2025 Ebitda forecast by 2.4 per cent to $186m on slower demand recovery.

In a guidance issued last November, Vulcan said the first four months of trading in 2024 had shown early signs of sales stabilising.

It said then that high interest rates were expected to limit the extent of a recovery.

Dual-listed Vulcan’s net profit for the year to June 30 last year came to $88m, down 29 per cent, while its Ebitda was $209m, down 7 per cent.

The company reported a 30.5-cents-per-share final dividend, bringing the total dividend declared for 2023 to 55.0 cents per share.

Shares in Vulcan last traded at $7.62, down 18c.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.