Bellwether Steel & Tube has turned in a strong half-year result, its acquisition of Tata Steel International Australasia underpinning a 22% revenue boost and 35% gain on after-tax profit.
For the six months to December, Steel and Tube's sales increased by $46.5 million on a year earlier, to $258.2 million, while its net profit was $10.8 million, up 35%.
Craigs Investment Partners broker Chris Timms said it was a ''good result'' for Steel & Tube, the key drivers being increased volume, price increases and the acquisition for $27.5 million in April last year of Tata Steel International, now trading as S&T Stainless.
''Apart from the net profit after tax, the highlight was the operating cash flows; up sharply to $10.1 million from last year's loss of $2.5 million ... . attributed to a reduction in working capital,'' Mr Timms said.
Steel & Tube shares gained more than 3% following the announcement, to trade around $3.03.
Steel & Tube's $30 million reinvestment plan is under way.
It includes three new purpose-built facilities, one of which is at Palmerston North and brings together processing, distribution and stainless operations under one roof.
The company said steel demand was steadily recovering, led by construction related-products, and almost to pre-global financial crisis levels, but was still lower than the 2005 peak.
Forsyth Barr broker Andrew Rooney said the $10.1 million result was slightly below expectations, albeit up from $8 million a year ago, and was inflated by a change in depreciation policy.
He said the global macro outlook remained challenging for Steel & Tube, with steel prices having fallen, and expectations they would remain low.
''Steel price volatility provides Steel & Tube with opportunities to drive price increases, and thus temporary margin upside, which has been tough in recent years,'' Mr Rooney said.
During 2014 non-residential consents increased 21% to $5.1 billion, with Canterbury, Auckland, Wellington and Otago all contributing to the increase.
Around the country, non-residential work increased by just 7% during the year, led by Canterbury with a 23% rise.
''The rest of New Zealand witnessed marginal improvement, and only in recent periods,'' the company said.
Mr Timms said while the outlook guidance offered ''very little disclosure'', it was positive.
Steel & Tube said falling commodity and oil prices could slow global growth, and noted the volatility in foreign exchange rates, the slowing Chinese economy and that steel prices were expected to remain weak due to oversupply ''Barring any unforeseen global economic changes that impact New Zealand, the company remains positive about the second half of the year,'' the company said.
