Vulcan Steel at turning point after profit plunge

Vulcan Steel's first-half profit has plunged.

Vulcan Steel says Australia and New Zealand are at a turning point after tough economic conditions in both countries drove the company’s first-half profit down 64.8% to $9.2 million.

The company slashed its first dividend by 79.2% to 2.5 cents a share (from 12c) and said its earnings before interest, tax, depreciation and amortisation (Ebitda) came to $56.9m, down 30.5%.

Managing director and chief executive officer Rhys Jones said trading in the first six months of the 2025 financial year was “variable and challenging”.

“Our customers have continued to face restrictive interest rate levels and weaker markets, and our 1H FY25 results reflect this, particularly in our steel division.”

Vulcan’s net bank debt dropped $34.3m to $241.5m.

Jones said in a conference call the outlook for Queensland and New Zealand – which together account for about 60% of the company’s revenue – was improving.

For New Zealand, he said the tide looked to be turning but the global environment for steel and aluminium was “unsettled” after the US announced tariffs on both metals this week.

Westpac chief economist Kelly Eckhold said New Zealand ranked 19th on the list of exporters of steel to the US, while Australia is 15th.

“We both got threatened with additional 25% tariffs last night.”

New Zealand steel exports to the US are worth around $100m a year, and aluminium about $70m, Eckhold said.

A spokeswoman for NZ Steel – a unit of BlueScope Steel – said New Zealand has been subject to a 25% tariff on steel exports to the US since 2018.

“Currently, most of the around 670,000 tonnes of steel we produce is consumed domestically,” she said.

Jones said in Queensland’s case, with the 2032 Summer Olympics approaching, business confidence had improved, assisted also by increased migration to the state from other parts of Australia.

“It’s a similar story in New Zealand.

“Clearly the lower interest rate impact is slowly starting to occur, particularly in the stainless steel segment,” he said.

“We believe the tide has fully gone out and is returning in New Zealand, but it’s going to be variable in pace by segment,” he said.

In Victoria, business was slow due to a number of stalled projects.

New South Wales was stable and would improve.

“The global economic outlook is certainly uncertain, and the US tariffs on steel and aluminium have unsettled things.”

Despite the headwinds in the first half of 2025, Vulcan achieved a 10% return on capital employed.

During the half, Vulcan’s net bank debt dropped $34.3m to $241.5m by the end of December 2024, due to a decrease in working capital and continued positive operating cashflows.

Notwithstanding market conditions, Vulcan said its active customer accounts in the half remained steady when compared with the second half of 2024.

In its result, Vulcan said pre-sales activity, customer channel checks within Vulcan and independent business surveys, combined with the Reserve Bank of New Zealand’s reduction in the Official Cash Rate since August 2024, pointed to improving market volume in the 2025 calendar year.

In the second or third quarter of the 2025 calendar year, trading volumes were expected to start recovering, it said.

In Australia, expectations were for the metals segment to remain relatively steady.

The Queensland and Western Australian markets were expected to perform better in 2025 compared with 2024.

Net debt decreased to $242m as of December 31, 2024, down $34m since June 30, 2024.

The company said its banking syndicate continued to be supportive.

Last October, Vulcan’s banks agreed to provide a relaxation of the existing banking covenant thresholds until December 31 this year.

Vulcan’s shares rose and were up 15c or 1.97% to $7.75 in late-afternoon trading.

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