Sharechat Logo

Steel & Tube pushes return to 'normal' earnings beyond 2021

Thursday 26th September 2019

Text too small?

Steel & Tube Holdings has pushed out its target for earning more than $30 million a year in operating profit from 2021 to an undetermined time beyond that.

The company managed to produce $16 million in earnings before interest and tax in the year ended June, well short of its original $25 million target.

"Longer-term, we still see a business that's capable of generating $30-35 million in ebit but it's going to take us longer to get there than the initial three-year period that we expected" in September 2018, chief executive Mark Malpass told the annual shareholders meeting on Wednesday.

That in itself was a downgrade of Steel & Tube's potential earnings capability. In August last year, when the company launched its $81 million capital raising, it was aiming for $35-40 million ebit in the year ending June 2021.

However, that reflects a change in the starting point after the company discovered in May this year that about $4 million of inventory had been mis-classified.

The last time Steel & Tube earned more than $30 million ebit was in 2017 and that was only achieved because of acquisitions. The company had then been through several years of effectively running flat-out to stand still

By June 2017, Steel & Tube had invested $32 million in upgrading its operations and had spent $80 million on acquisitions over the previous four years but produced little in the way of payoff.

As for the current year, the company isn't game to voice a forecast.

"It is too early to give guidance. We expect a continuation of current adverse market trends, coupled with a softening in business confidence, and ongoing competitive intensity across the major of sectors that we're operating in," Malpass said.

Improving margin performance and delivering profitable growth are the priorities for the current year, he said.

That will include delivering on the company's customer service promise, getting the benefit of its restructuring and rationalising of inventory and savings from bringing its warehousing in house. The company will also continue to sell property.

"We are reviewing options for the sale of the three remaining owned properties, one of which is surplus to requirements. We anticipate that two of the properties will be sold this financial year," Malpass said.

Steel & Tube shares rose 1.2 percent to 86 cents, trimming their decline this year to about 28 percent.

(BusinessDesk)

NOTE: please be advised to read full articles from Business Desk Website, you will have to pay a subscription fee on their website.



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar consolidates weekly gain of more than a US cent
NZ dollar holds gains on improved dairy, bank capital outlook
MARKET CLOSE: NZ shares gain; banks rally on Reserve Bank capital decision
NZ dollar rises; bank capital rules less harsh than expected
RBNZ relaxes capital requirements, allows preference shares, extends phase-in
NZ dollar extends gain amid mixed US data, possible trade progress
MARKET CLOSE: NZ shares dip on eve of major regulatory decisions
NZ dollar sees off global headwinds, holds above 65 US cents
NZ dollar holds above 65 US cents; dairy auction prices mixed
Dairy index falls on weaker butter, milk fat demand

IRG See IRG research reports