Steel & Tube beats forecasts

Steel & Tube's $8 million after-tax profit came in ahead of analysts' expectations and the robust economic construction conditions bode well for its full year's trading.

Total revenue for the half year to December was up from $199.6 million a year ago to $211.7 million.

Earnings before interest and tax (Ebit) were up from $11 million to $12 million, and the $8 million after-tax profit up from last year's $7.3 million.

The interim dividend rose from 6.5c last year to 7c and its shares rose 1.3% to trade around $3.14 after the announcement.

Both Craigs Investment Partners broker Peter McIntyre and Forsyth Barr broker Andrew Rooney said the result was ahead of their respective forecasts and both saw a positive second half trading flowing into the full-year results.

Mr Rooney said: ''Construction and rural activity are both robust, while manufacturing activity is picking up slowly, some of which is from flow-through construction''.

He noted new capabilities had been commissioned in Christchurch, which was in line with the boost in building activity, but a mid-year price increase had a ''mixed impact'', due to intense competition in the sector.

He expects a pick-up in capital expenditure, possibly from a niche business for growth, which would ensure Steel & Tube remains competitive.

Mr McIntyre said the better results were driven by higher volumes and productivity, but partially offset by lower pricing.

''Steel & Tube is still operating below its full potential,'' he said.

For Mr McIntyre, a key issue to note was a weaker cashflow, down $2.5 million, due to the stepping up on working capital, up 13% on a year ago to $128 million.

''The outlook's positive on construction and rural, and mixed on manufacturing. The global steel outlook is also slightly more upbeat,'' Mr McIntyre said.


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