Steel & Tube profit down 68% at $3.4m

Peter McIntyre.
Peter McIntyre.
Restructuring and inventory writeoff undermined Steel & Tube's first-half trading period, underlying profit plunging almost 65% from $10.6million a year ago to $3.4million.

For its six months' trading to December, revenue rose 4.9% to $268.7million, earnings before interest and tax (ebit) fell 58.4% to $6.7million and profit plunged 68.3% to $3.4million.

The result was in line with analysts' expectations and company guidance, which in November estimated ebit would be $9million-$10million lower than at the corresponding time last year.

The company said the half-year result included significant non-trading costs, related to a working capital review and restructuring activities.

Steel & Tube chairwoman Susan Paterson said the change programme was progressing well and while there might be some further negative earnings potential, as the company worked through significant change and rebuilding, early benefits were beginning to be seen.

Craigs Investment Partners broker Peter McIntyre the inventory value writedown included $5.5million of aged stock, which followed a substantial review of holdings.

''There was $2.56million of non-trading costs relating to restructuring activities,'' he said.

Steel & Tube's declaration of a 7c per share dividend was down 20% on a year ago, he said.

He noted Steel & Tube's debt levels ''remained high''.

''Inventories reduced by about $9.6million since June last year and further reductions are expected,'' Mr McIntyre said.

Forsyth Barr broker Damian Foster said while revenue was higher, that was offset by a decline in profit margins, from 25.6% down to 22.6%, which reflected competitive pressures and also domestic price rises, which were lagging behind international steel costs.

Net debt was down 25%, because of a $32million property sale and $10million inventory reduction, the latter outside the inventory writedown.

''We understand Steel & Tube has been more determined in retaining market share of late, after ceding [market] share during the past few years,'' Mr Foster said.

He noted no guidance or outlook comments were provided.

Steel & Tube's interim chief executive for the past five months, Mark Malpass, was this week appointed to the top job permanently following the sudden departure of Dave Taylor last September.


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