Steel and Tube forecasts steep fall in year-on-year earnings

Building products firm Steel and Tube is forecasting pre-tax earnings to fall by half on a year ago in a subdued and challenging market.

It expected earnings for the six months ended December of $10 million – $11m, which compared to $10.6m in the preceding half year, and $21.5m in the same period last year.

Chief executive Mark Malpass said it had concentrated on customer service, pricing, and cutting $5m in costs, which had offset inflation.

“While volumes have been under pressure from economic headwinds, staying the course on strategy and the focus on ‘controlling the controllables’.”

He said the company had increased its margins, gained market share, and strengthened its balance sheet by nearly tripling the amount of cash over the past few months to $17.1m, while cutting inventory.

“In difficult economic times, maintaining a strong balance sheet and a lean cost structure is critical.”

Changes made over the past two years to concentrate on high value products and services were paying off, he said, and acquisitions of Kiwi Pipe & Fittings and Fasteners NZ were performing strongly.

Malpass expected strong earnings growth to return to previous levels as the economy grew and demand improved.

“We expect to see more incentive for investment in construction projects and a more favourable manufacturing environment. Net immigration growth will drive demand for housing, and the infrastructure pipeline remains strong.”

“We have significant medium- to long-term opportunities in areas of climate resilience, seismic strengthening, rebuild activity and essential water services supported by government-budgeted infrastructure spend of $71b over the next five years,” Malpass said.

Get the RNZ app

for ad-free news and current affairs