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Steel & Tube first-half profit tumbles 85% on weaker steel prices, less demand

Thursday 11th February 2010

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Steel & Tube Holdings, which supplies steel building products such as reinforcing rods, reported an 85% slump in first-half profit, reflecting weaker demand and prices.

Net income fell to $3.17 million, or 3.6 cents a share, in the six months ended Dec. 31, from $20.8 million, or 23.5 cents a year earlier, the company said in a statement. Sales fell 30% to $190 million.

The shares slipped 0.4% to $2.75, reversing an earlier gain, after the results, which were weaker than the $4.3 million profit forecast by Forsyth Barr analyst Rob Mercer. Steel & Tube was hurt by a drop in demand for materials for commercial construction in the wake of the financial crisis and recession in New Zealand, while residential demand held near its lows.

“Strong competition for reduced volumes and declining steel prices has squeezed margins,” chief executive Dave Taylor said. “The strength and sustainability of any pick up in activity is still uncertain as economic conditions show varying growth rates across our trading partners.”

The company’s low gearing ratio of 19% means the company is well positioned for any upturn, he said.

The company will pay a first-half dividend of 3.5 cents a share.

Taylor said the company’s focus on inventory, management of debt and discretionary expenses resulted in a positive operating cash flow of $27.3 million in the first half, from a negative $8.8 million a year earlier.


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