Steel & Tube is planning to make up to 200 staff redundant and warned its restructuring efforts and other coronavirus-related impairments and doubtful debt provisions will hurt this year's bottom line.
The company said it is trying to "ensure a cost base that is fit for purpose" and has reviewedhow it can maintain geographic coverage with recent investment in digital capabilities and e-commerce options enabling further rationalisation of its physical branch network.
"Unfortunately, these changes will impact on jobs and result in 150 to 200 redundancies. Discussions have commenced and the company is engaging with staff and union delegates on this process and to provide support to all affected employees," the company said in a statement.
Still, it said its balance sheet and debt facilities will provide sufficient financial liquidity. Debt had fallen below $3 million by March 31 and it had bank facilities of $70m.
"Management has been in constructive discussions with its banking partners and has sought and received a prospective waiver on future bank covenant tests and approval to extend the term of its working capital facility," Steel & Tube said.
Net debt at December31 had been $10.9m before the sale agreed post balance date of a surplus Christchurch property for about $5.8m.
Steel & Tube shares rose 3.2 per cent to 65 cents when trading opened today, off their March low at 47 cents but still down 17.7 per cent year to date.
Although the company had secured large project work before the country's lockdown from March 26, Steel & Tube said second-half sales would be significantly below the previous second half.
With the nation moving today from the level 4 lockdown of all but essential industries to the slightly less restrictive level 3, "the company has deployed industry-leading procedures to safely manage operations" and most of its facilities will be open.
"The company has implemented digital systems to support customers with contactless ordering and delivery of products," it said.
"The world is now in a much different place than it was just four weeks ago and we are making structural changes to our business model to ensure Steel & Tube emerges from Covid-19 as a stronger and more resilient company," chief executive Mark Malpass said in the statement.
"Steel & Tube is well positioned for the anticipated government infrastructure projects. We continue to lead industry standards and have secured further customer wins during the lockdown, including a significant government roofing contract and other large projects are being finalised," Malpass said.
Steel & Tube was already struggling before the coronavirus crisis hit, reporting a near 42 per cent fall in earnings before interest and tax to $5.7m for the six months ended December.
Its bottom line was a $37m net loss after non-trading costs including $2m restructuring and relocation costs and a non-cash goodwill impairment of $37.1m.
In February in announcing these results, the company said it had managed to cut its labour costs by $800,000 in the six months but its wages bill still rose about $600,000.
Even before today's announcement, Steel & Tube has incurred write-downs, restructuring and other one-off costs of well over $80m in the past two and a half years.
