Steel & Tube warns of further hit to first-half profit

The company said trading conditions earlier this year had an impact on sales and credit quality. Photo / File

Steel & Tube Holdings says its first-half results will be hit by at least a $2 million charge for debt write-offs and provisioning with the board planning to review carrying values in February ahead of the results announcement.

"The trading conditions in the first few months of the financial year have had an impact on both sales and credit quality with an increase in debt write-offs and provisioning expected to impact earnings," the company says in a statement.

The steel products distribution company had already warned the results for the six months through Dec. 31 would be hit by about $2 million in restructuring costs but it hasn't provided an earnings forecast.

Steel & Tube reported that first-half net profit last year more than halved to $3.8 million from $10.6 million in the same six months of the previous year. Earnings before interest and tax fell to $6.7 million from $16.1 million.

"The competitive intensity and pricing pressures from the second half of the last financial year have continued," the company says.

"Initiatives to improve product margins are starting to have a positive impact and market share has remained relatively stable. Market activity levels have been softer, particularly in the vertical construction and stainless steel markets, albeit more recently there has been improvements in sales and tender activity levels," it says.

"We have had a challenging winter, although improvements we have made to customer service and cost structure, coupled together with recent signs of activity improvement, are expected to lead to improved performance in the second half," chief executive Mark Malpass says.

At the annual shareholders' meeting in late September, Steel & Tube said it would take an undetermined time longer than the initial three-year estimate to get annual ebit back to more than $30 million.

The company managed to produce $16 million in earnings before interest and tax in the year ended June, well short of its original $25 million target.

Steel & Tube shares ended Friday at 87 cents and have fallen 32 per cent in the past 12 months.

- BusinessDesk