Steel & Tube ended 2c (2 per cent) down at 94c after issuing an 11-month update, which said it was performing well relative to a challenging market, where demand for steel has been at even lower levels than those seen during the Global Financial Crisis.
The company said it had continued to grow margins and maintain market share, strengthen customer relationships and significantly improve operating leverage to position itself for New Zealand’s economic recovery.
However, Steel & Tube is now forecasting 2024 June year normalised earnings before interest and tax of $14m to $15m, down from a market consensus forecast of about $23m.
At an earnings before interest, tax, depreciation and amortisation level, Steel & Tube now sees a $35m to $36m profit for the year, against market consensus expectations of $45m. Steel & Tube still expects to declare a final dividend for 2024 and for demand to improve in 2025.
“It was a sizeable downgrade,” Salt Funds managing director Matt Goodson said.
“It should not be a surprise to anyone as Steel & Tube is a classic cyclical stock, with booms and busts, and we are in a bust phase at the moment.”
Vulcan Steel - which has extensive steel distribution interests in New Zealand and Australia - fell by 4c to $7.72 “because the key drivers are the same”, Goodson said.
Fletcher Building ended steady at $3.00 as the blame game with BGC over Fletcher’s allegedly faulty pipes in Western Australia continued to play out.
In response to renewed claims in the media from BGC, Fletcher Building said it continued to participate in mediated discussions alongside the Western Australian Government and many WA builders, including BGC, to finalise an industry response to the plumbing failures occurring in Perth.
“The public claims made by BGC are a crude and apparent attempt to place pressure on those negotiations,” it said.
“The conclusions shared by BGC have not been verified, shared with Iplex and are, in many respects, inconsistent with evidence we have gathered first-hand or been provided by other parties,” Fletcher Building said.
Goodson said the dispute was one of the key uncertainties to hang over Fletcher Building “and the parties still appear to be at loggerheads”.
Aside from corporate announcements, the market took some comfort from data showing only a slight 0.2 per cent lift in food prices in the year to May.
ASB Bank said it looked like pricing pressures were cooling and that monetary policy was working.
Annual consumer price index inflation remained on track to fall below 3 per cent before the year’s end, it said.
Goodson said there was now a reasonable view that a rate cut from the Reserve Bank could happen later in the year, which would be helpful for the sharemarket.
Genesis Energy, after taking a hit earlier in the month after disappointing results from its KS-9 well in the Kupe gas field, firmed 3c to $2.24.
Goodson said the company’s share price was catching up with the other big power companies, which had been firm.
“Gas is still a relatively small driver for them compared with electricity generation and its retail operation.”
In other movements, a 25c gain to $30.77 for Fisher & Paykel Healthcare - the market’s biggest stock - helped to offset broader market weakness.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
