Polarised demand forecast for S&T

Haley van Leeuwen
Haley van Leeuwen
Bellwether company Steel and Tube will be one of the first to report in the listed companies' financial reporting season this week, brokers expecting its profit to be up by between $6.6 million and $6.9 million, in line with earlier guidance.

Almost two years after Christchurch's deadly February 22 earthquake, construction and supplies companies involved in the rebuilding are beginning to see more solid work commitments.

Craigs Investment Partners broker Peter McIntyre said he expected to see a ''polarised demand'' for Steel and Tube in its first-half 2012-13 trading result, due out Friday, demand from Christchurch being ''strong'' and offsetting ''subdued'' demand elsewhere.

''The share price has had a strong run since November on the back of positive news on the Christchurch rebuild and the wider economy,'' Mr McIntyre said.

Forsyth Barr broker Haley van Leeuwen expects revenue to be up 3.0%, to $209 million, earnings before interest and tax up 7.1%, to $10.4 million and normalised profit up 7.3%, to $6.9 million.

Peter McIntyre
Peter McIntyre
''We expect the increase in earnings to be driven by a slightly improved earnings before interest and tax margin of 5%, reflecting stronger activity in Christchurch, albeit still hampered by soft activity outside the Canterbury region,'' she said.

The focus remained on the medium-term outlook for the materials sector, the continued increase in Christchurch rebuilding activity and a general economic recovery at the fore, Ms Van Leeuwen said.

On the negative side, steel prices during the first half of 2012-13 were on average 15% down on a year ago and had ''stagnated'' during the period at $760 a tonne for hot-rolled coil.

''The lower prices continue to weigh on earnings before interest and tax margins, and we expect they will have partially offset any increase in steel demand over the first half,'' Ms Van Leeuwen said.

Mr McIntyre said the steep decline in the global steel price during the first quarter was unlikely to have a major impact on first-half domestic pricing because of a lag effect of four to six months.

Craigs is forecasting a first-half 2012-13 after-tax profit of $6.6 million for Steel and Tube, a 3% gain on the same period last year.

The improvement was driven by lower interest costs and a ''modest improvement'' in sales and volumes, albeit on flat margins, Mr McIntyre said.

''We are starting to see the momentum in the Christchurch rebuild beginning to drive a national upturn in non-residential construction at the end of the second quarter,'' he said.

- simon.hartley@odt.co.nz

ODT/directory - Local Businesses

CompanyLocationBusiness Type
Ian Day Lifestyle EquipmentAlexandraEquipment & Machinery
Wanaka Nu Look - Aluminium Windows & DoorsWanakaWindows
Rainbow Pre SchoolDunedinChildcare & Kindergartens
Ace NetworkDunedinTraining & Education