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Steel and Tube FY profit rises 19 percent as costs fall more than sales

Friday 16th August 2013

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Steel & Tube Holdings, the steel building products firm whose majority shareholder exited its holding last October, posted a 19 percent gain in full-year profit, meeting estimates, as costs fell more than sales.

Profit was $15.6 million, or 17.8 cents a share, in the 12 months ended June 30, from $13.1 million, or 14.9 cents, a year earlier, the Lower Hutt-based company said in a statement. Sales fell to $393 million from $405 million. Profit of $15.3 million was expected, according to First NZ Capital.

Steel & Tube is likely to be a key beneficiary of the rebuild of Christchurch and building activity in Auckland but the company reported mixed results across the country. Momentum in construction activity in Christchurch dissipated in the second half compared to the first six months of the financial year half and with the exception of Auckland "most other regions remained subdued," it said today.

Still, "the lower activity was against a domestic backdrop of growing optimism" and overall the second-half performance eclipsed the first half.

Steel & Tube doesn't release the notes to its results until it publishes its annual report and executives weren't immediately available to explain a 4.5 percent decline in cost of sales to $309.5 million. It held most other expenses unchanged from 2012 levels.

The company lifted its final dividend payment to 8.5 cents a share from 6.5 cents a year earlier.

The shares last traded at $2.51 and have gained 16 percent in the past 12 months, lagging behind the NZX 50 Index's 25 percent gain. The stock is rated a 'buy' based on a Reuters survey.

Steel & Tube didn't give specific guidance for the current year.

"The New Zealand economy appears to be slowly gaining momentum across an increasingly broad range of sectors," it said. "While encouraging, our optimism remains tempered until we see an actual uplift in the sectors we serve."

The rebuild of Christchurch is "the big opportunity" for Steel & Tube and the company is waiting for the commercial elements of the reconstruction to "decisively commence."

"The global steel manufacturing industry needs to improve margins and there appears to be increasing sentiment to find ways to improve pricing," the company said. "We expect upward pressure on steel pricing domestically and a price increase may follow in the first half."

In October, Australia's Arrium sold its 50.3 percent stake in Steel & Tube.

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