Volatile mkts contribute to Steel & Tube 9% profit fall

By NZPA

Thursday 16th August 2007

Engineering and contracting company Steel and Tube said today the strong NZ dollar and high interest rates contributed to a 9% decline in net annual profit to $27.8 million.

Trading was expected to remain tough, although conditions could brighten in the next calendar year as increased earnings from dairy farming flowed through the economy, Steel & Tube chief executive Nick Calavrias said.

For the year to June, revenue was up 6% at $466.3m. The result included a full year's contribution from NZF Stainless, compared with three months' contribution the previous year.

Sales were little changed, allowing for the effect of the acquisition.

"Although the result did not match last year's, the company performed well considering the volatile market conditions it had to contend with," Calavrias said.

"The impact of the strong NZ dollar and high interest rates throughout the year, adversely affected the key industries serviced by the company."

Total construction activity increased on the back of residential housing demand, but the value of commercial construction, a key driver for the business, was steady.

The distribution business produced higher earnings, while the manufacturing business underperformed.

Commercial construction activity and infrastructure projects for the 2011 Rugby World Cup were likely to start next year, providing a boost to the sector, but residential housing construction was expected to suffer as lower migration and higher mortgage rates took effect, Calavrias said.

The result represented an after-tax return on average shareholders' funds of 20%.

The company declared a final dividend of 14c per share, payable on September 28. A supplementary dividend of 2.47cps will be paid to non-resident shareholders.

Shares in Steel & Tube shares were down 20c, or 4.3%, at $4.50 today.

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