Steel & Tube shows mettle

Steel & Tube says it is optimistic about second-half earnings growth, with revenues from all three of its business units appearing to have bottomed out. However, it warned that timing issues could sour the outlook.

The Wellington firm yesterday reported a net profit of $7.3 million for the six months to December 31, up 14 per cent on the previous half-year.

It is a profit level that chief executive Dave Taylor is confident the firm will beat in the second half of the year, particularly as construction in Christchurch and Auckland feeds into demand for steel products from builders and the manufacturing sector.

Likewise, demand from farms is also rising, albeit modestly, with meat and wool prices sitting below last year’s highs and dairy farmers cautious about spending, given depressed payout forecasts from Fonterra.

Shares in Steel & Tube rose 4.3 per cent yesterday to $2.65, having gained 20 per cent in the last year.

However, Taylor remains cautious about the outlook, saying that while the rebuild will drive revenue in the near future, timing issues could still be a factor.

A significant lift in building Retailing in New Zealand is proving a harder grind than across the ditch, jewellery retailer Michael Hill says, but that was no obstacle to first-half profit growth.

The company’s comments echo those of other retailers, but latest spending data suggests Kiwis are gradually loosening the purse strings. consents, for example, suggested construction activity was rising, but Taylor said Steel & Tube would see the bottom-line benefits only when projects actually started.

He said many market players had incorrectly guessed the timing of the rebuild several times already, but with consents starting to lift the predictions were starting to align. Even so, he was confident that operational changes would continue to boost margins. Steel & Tube’s strategy to consolidate its businesses into a single regional footprint and the introduction of a new supply chain saw it trim its cost of sales $5.9m to $156.7m.

Michael Hill International grew net profit for the six months to December 31 by six per cent year-on-year, to $27.8 million.

The NZX-listed retailer grew revenue 8.3 per cent to $312.9m, while earnings before interest and tax weighed in at just under $36m – up 3.4 per cent.