Steel & Tube boosts revenue and profit

Manufacturer Steel & Tube has posted boosted revenue and profit for its full-year result, in part due to its acquisition of Tata Steel (Australasia), from Indian steel giant Tata.

While the steel industry globally remains in the doldrums, Steel & Tube appears well prepared to meet rising demand for not only Canterbury rebuild materials but also several high-profile large construction projects around the country.

For its trading year to June, Steel & Tube's revenue grew 12.2% from $393 million to $441.4 million while after-tax profit grew 14.7% from $15.6 million a year ago to $17.9 million.

In April, Steel & Tube purchased Tata Steel (Australasia) for $28.1 million, rebranding the company S&T Stainless, which contributed $12.9 million in revenue.

Steel & Tube chief executive Dave Taylor said the Tata Steel acquisition strengthened the company's position as the leading stainless supplier within New Zealand, with exclusive distribution rights to several key product lines.

Aside from the Canterbury rebuild, Steel & Tube's other projects include Auckland's Waterview Connection, Wellington's National War Memorial Park and underpass, and Burwood Hospital in Christchurch.

Mr Taylor said the company was continuing to reinvest for growth.

''Economic activity, and consequently volumes, improved across most sectors although competition remains intense, restraining margins,'' he said.

Two new facilities are being built in Auckland, with new plant and machinery to enhance processing capability and efficiency, and another purpose-built facility in Palmerston North is scheduled to open at the end of the year.

Craigs Investment partners broker Peter McIntyre said the result was ''reasonable'', given present trading conditions, and Steel & Tube was large enough to be competitive in the sector, even though its profit margins had declined because of competition.

''From here on in they will be making the most of [construction] momentum, in both Christchurch's rebuild and Auckland,'' he said.

It was positive that S&T Stainless was earning money for its parent, and while debt had risen to $58 million because of the acquisition, Steel &Tube's overall debt profile was under-geared, Mr McIntyre said.

Steel & Tube shares gained 10c to $3.45 following the announcement.

Forsyth Barr broker Andrew Rooney said Steel & Tube's result was ''solid'', particularly given the ongoing challenges with global commodity prices and competitive pressures domestically.

''In saying that, the volume growth was not unexpected, due to the strengthening construction, manufacturing and rural activity over the past six months,'' Mr Rooney said.

He noted net operating cashflows declined 55% against last year, as payments to suppliers and employees increased significantly, ahead of receipts from customers. Inventory levels climbed by 38%.

''While there will be an element of this driven by market activity ramping up, this seems somewhat over the top,'' Mr Rooney said.

Management had highlighted that the underlying domestic activity outlook for the construction, manufacturing and rural sectors was positive, and improved during the second half 2014.

''In saying that, the domestic competition issue ... is constraining [profit] margins,'' Mr Rooney said.

simon.hartley@odt.co.nz

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