Steel & Tube lifts its profits

THE profits of New Zealand’s leading supplier of steel products and services, Steel & Tube, jumped 20 per cent for the June year to $21.4 million. But the company has warned that the ‘‘free fall’’ in world dairy prices would have some effect on rural spending and activity had slowed in the manufacturing sector.

The economy was ‘‘moderating’’ after peaking in 2014, and now faced challenges, especially for dairy and linked industries that was hitting business confidence, the company said. World steel demand remained soft, with an oversupply in steel, so prices were likely to remain ‘‘soft’’. But a lower New Zealand dollar was helping domestic business.

The Wellington-based company’s revenues also topped $500m, with sales up 14 per cent and the firm said it was in ‘‘very strong shape’’. It declared a final dividend of 10c a share, up 1c on last year.

Steel & Tube shares closed on Friday down 6c at $2.75, having traded in a range of between $2.75 and $3 in the past year. The shares are up 3 per cent on a year ago.

The company has been investing in facilities and plant and recently completed its second acquisition in 16 months, taking over fastenings business MSL on August 3. MSL, which includes the Fortress brand, has eight branches around the country, and employs 100 people

Acquisitions would help offset the impact of the slowing New Zealand economy and the ongoing softness in global finished steel prices, the company said.

S&T chief executive Dave Taylor said the results were ‘‘particularly pleasing’’ when seen against the economic challenges of the second half of 2015. The period had seen overall growth moderate, ongoing volatility in the global steel environment and a softening of raw material and finished steel prices.

‘‘However, notwithstanding those issues, construction has continued to perform strongly, and our S&T Stainless business achieved in line with expectation.’’

Steel demand was steadily increasing, led mainly by construction related products. And the intensity of steel use had increased as buildings were strengthened to make them stand up to earthquakes.

In the June year, nonresidential building consents values were up 19 per cent on the previous year, with Auckland and Christchurch leading the way. Home building consents were up 11 per cent in the June year, again led by Auckland and Christchurch.

During the past year S&T opened three new purpose-built facilities: one in Palmerston North and two in Auckland, enhancing the company’s distribution and processing facilities, making it well-positioned for the expected growth of the Auckland market, the company said.

S&T is listed among the top 50 companies on the stock exchange.