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Steel & Tube affirms guidance citing new contracts, cost savings

Monday 24th September 2018

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Steel & Tube Holdings has reaffirmed its full-year earnings guidance citing new customer contracts and progress with efforts to streamline its business and cut costs.

The firm, which incurred almost $54 million in write-downs and restructuring costs last year, reiterated that it expects to report earnings before interest and tax of $25 million in the financial year ending June 30. That is up from $16.5 million last year before one-off items.

Chair Susan Paterson said the board is pleased with progress on a range of initiatives and sales remain on a “positive trajectory.”

“The company now has a solid foundation from which to build Steel & Tube and the financial flexibility to implement our business transformation initiatives, achieve longer term strategic objectives and create long-term value for shareholders. The board remains confident in the improving performance of the company under its significantly advanced turn-around strategy.”

Steel & Tube is one of New Zealand’s largest steel suppliers. It raised almost $81 million last month to pay down debt after restructuring costs and write-downs put it in breach of its borrowing agreements.

Today it said the significant investment made in the group’s enterprise resource planning system is delivering benefits, while the firm is also consolidating its facilities, exiting third-party warehousing arrangements and re-tendering freight runs.

While the market remains highly competitive, it said it has won new customers, committed to large contracts and continued reducing costs. A significant contract to supply steel to the Westfield Newmarket project is under way, as is the Puhoi to Warkworth motorway project and another significant infrastructure project in the lower North Island.

Steel & Tube made its 2019 forecast on Aug. 7. It said then that it would resume paying dividends this year and expected normalised ebit to be back up to $35 to $40 million within three years.

The firm’s shares last traded at $1.22 and are down about 40 percent so far this year.


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