Steel & Tube annual profit plunges 9.3pc

Net profit rose about 21 per cent to $25.8m, helped by a $6.4m gain on the sale of Steel & Tube's Bowden Rd property. Photo / File

Steel & Tube Holdings, whose shares have recovered from a 15-year low in the past two months, posted a 9.3 per cent decline in full-year underlying profit as it faced increased costs and "intense" rivalry.

Underlying profit was $19.4 million in the year ended June 30, from $21.4m a year earlier, the Wellington-based company said. Sales rose 3 per cent to a record $516m but the gain was swallowed up by selling and administration expenses and a one-off cost impact in the second half related to product quality issues.

The steel products distributor is clawing back from a tough year, which saw its shares sink as low as $1.79 in June -- the lowest since 2001.

In March, the Commerce Commission began an investigation into earthquake reinforcing mesh products that weren't certified as claimed, the company was forced to cut guidance in May as intense competition in the domestic steel market squeezed margins and its Chinese-sourced road reinforcing for the Huntly bypass was found to be weaker than specified.

In the event, full-year underlying earnings exceeded its May guidance.

"The continued execution of the company strategy through the financial year has positioned Steel & Tube well, creating strong foundations as shown by the year's performance in spite of the challenges of low global steel prices and questions around some product quality," said chief executive Dave Taylor.

"Despite the headwinds we've experienced and particularly in the second half of the year, our results demonstrate our resilience and ability to continue delivering sustainable value."

Net profit rose about 21 per cent to $25.8m, helped by a $6.4m gain on the sale of Steel & Tube's Bowden Rd property in Auckland.

The company will pay a final dividend of 13.5c on September 30, up from 10c a year earlier, lifting total payments for the year to 22.5c from 19c.

Taylor said the company remains "in a challenging global steel environment" but steel prices "are firming both domestically and globally".

The company's shares closed up 9c yesterday at $2.19. They are rated a 'hold' based on the consensus of three analysts polled by Reuters with a median price target of $2.20.

Steel & Tube - Year ended June 30

• $516m sales, up 3 per cent

• $25.8m net profit, up 21 per cent

• $19.4m underlying profit

• 22.5c total dividend, up from 19c.