Steel & Tube year result ‘nothing new’

STEEL & TUBE’S fullyear result last week held no surprises for brokers, with most focused on the year ahead as restructuring measures ripple through the steel manufacturer and supplier.

Steel & Tube had signalled the market last month what its full year was looking like, when it announced an $81 million capital raising to cover debt and restructuring.

Revenue for the full year declined from $511.4 million to $495.8 million, and the board then applied a total $53 million in asset writedowns and impairments, for the year to June trading.

Including the impairments, earnings before interest and tax (ebit) was a $36.2 million loss and aftertax profit sunk to a $32.1 million loss, from a $20 million profit the previous year.

The company said a detailed review of operations was undertaken and a number of ‘‘legacy issues’’ were identified; largely many of the writedowns and impairments.

Steel & Tube chief executive Mark Malpass said the company has been restructured to improve its capabilities and efficiencies and to capture synergies from acquisitions.

He said ‘‘significant progress’’ was being made on its Project Strive business initiatives, which he expected to have positive benefits for the current financial year.

Steel & Tube confirmed no final dividend — just the 7c struck earlier in the year, with a prospect of returning to dividends in full year 2019.

Broker from Craigs Investment Partners described the full year result as ‘‘nothing new’’, while Forsyth Barr called it ‘‘largely a formality’’.

Craigs broker Chris Timms said now that the ‘‘poor’’ full year 2018 was behind the company, its focus was now firmly on a return to normal earnings.

He noted Steel & Tube had reiterated guidance of full year 2019 ebit above $25 million, and within three years to a range of $35 million to $40 million.

He noted there would be tax losses carried into 2019 and the positive impact from the $81 million capital raising prompted expectations of a higher after tax profit for 2019.

Forsyth Barr broker Damian Foster said there was a need for the market to see more confidence in Steel & Tube’s outlook.

The company had made ‘‘significant changes’’ during the past 18 months, having refreshed its senior management and board, and introduced a new strategy.

‘‘We need more than a few months improving revenue to give us confidence in the mediumterm outlook,’’ he said.

Steel & Tube still faced numerous issues, including volatile demand, prices, margins, operating expenses and continued losses in market share, Mr Foster said.

While maintaining a ‘‘neutral’’ rating on the stock, Mr Foster said the market wanted to see ‘‘firmer evidence’’ of progress from its restructuring.