Steel & Tube shares jump as higher steel prices lift profit

Thursday 12th February 2009

Steel & Tube Holdings, which supplies steel products to the construction industry, said first-half profit more than doubled on higher prices for steel. The shares climbed 5.1% after the announcement.

Net income rose to $20.8 million, or 23.5 cents a share, in the six months ended December 31, from $8.6 million, or 9.7 cents, a year earlier, the Wellington-based company said in a statement. Sales rose 11% to $274 million.

Steel & Tube managed to navigate through the housing downturn with continued sales for commercial construction projects and demand from the farming sector, chief executive Nick Calavrias said. He was less upbeat about the outlook.

"We expect market conditions in the short term to be as tough as we have seen for a very long time with a good deal of uncertainty, and the deteriorating trading conditions are expected to reduce our second half result substantially," he said.

Earlier today, Fletcher Building, New Zealand's biggest building products producer, posted a 27% drop in first-half profit as demand sank. Sales rose 6% to $3.76 billion on higher steel prices.

The government's tax cuts and $500 million spending speed-up on infrastructure projects such as schools, roads and housing "is expected to lessen the impact of the global recession," he said. Calavrias is stepping down after 17 years in the job, ending a 42-year career in the steel industry.

The company's cost of sales rose 3.4% to $202.8 million, lagging sales growth and resulting in a fatter margin.

Shares of Steel & Tube rose 15 cents to $3.10, trimming their decline in the past 12 months to 24%. The NZX 50 Index is up 0.4% today.

By Jonathan Underhill

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