There's no hiding from the numbers for Steel & Tube Holdings – it's been tough six months and just a small improvement is expected over the rest of the year.
Today's half-year result was to be expected given the headlines over the last 12 month
There’s no hiding from the numbers for Steel & Tube Holdings – it’s been tough six months and just a small improvement is expected over the rest of the year.
Today’s half-year result was to be expected given the headlines over the last 12 months detailing a slumping building industry and a rural sector that was hunkering down in an attempt to best weather the economic storm.
The slowdown on those fronts hit the company’s bottom line hard – Steel & Tube’s interim results for the first half of the 2009/10 year showed a drop of 85% with an after tax sum of $3.2 million.
That represented a $17.6 million drop compared with the same period the previous year.
All this followed an after tax profit of $26.1 million in 2008/09, up $3.6 million on the previous year.
At the time of reporting its full year result, the company said there was some prospect of improvement in 2010 if demand picked up, although noted there was a degree of uncertainty as to the timing.
A similar theme came forth today.
“Overall there are early signs that conditions may be slowly improving, but the key issue is the uncertainty around the extent and timing of the recovery.”
Any recovery, noted the company, was liked to have only a limited or minimal effect this financial year.
“It is expected, however, that the second half of the financial year will produce results ahead of those achieved in the first six months.”
Looking even further ahead, Steel & Tube chief executive Dave Taylor told NBR today that volatility was a key factor in future gazing.
The “V” word applied to the state of the Kiwi, steel prices both domestic and imported along with the state of both the residential housing market and infrastructure spending.
Mr Taylor said hope, even just a few weeks ago, that the housing market was improving has been quashed with new numbers suggesting a slow build up.
He said the 2008/09 financial year was a period of “two halves” that led to positive results for the company.
“We had a chance to maximise earnings but that changed with the global financial crisis and the it changed very quickly. Now we have to deal with the aftermath of that.”
Mr Taylor said recovery would be slow and gradual.
“We’ll just have to work our way through it.”
Forsyth Barr analyst Rob Mercer also indicated there could be improvement in the second half.
“Despite the interim dividend of 3.5c being lower than expected, we believe if the [second half] improvement does lift reported profit to around $9 million, then our [full year] forecast of 10c could be maintained,” he said.
He said the company’s capital management has helped it to reduce net debt to $30 million against $47.5 million in June last year, and is lower than forecast.
“Lower inventory has been a key source of improvement in working capital.”
Steel & Tube Holdings half year interim results available here.
Steel & Tube’s share price fell slightly following the half year interim results and was trading at $2.70 this afternoon (NZX: STU)
