Steel & Tube Holdings Limited Analysis

Overview

Steel & Tube was formed in 1953 and listed in 1967. It is now one of New Zealand's leading providers of steel solutions, allowing access to the widest range of steel products in the market, through its nationwide network of distribution centres. The company distributes and processes a range of steel products and operates through two divisions - Distribution and Infrastructure - and offers an end to end customer experience, advising, sourcing and supplying customers with their steel requirements.

The acquisition of complementary businesses over the years has led to Steel & Tube owning a portfolio of strong heritage brands. The company is focused on delivering quality service and products, safely to customers.

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Today, Steel & Tube operates in the New Zealand market, primarily in the construction, manufacturing and rural sectors.

Performance

The following information was extracted from Steel & Tube Holdings Limited's Full Year Results, released on 26 August 2024:

Steel & Tube Holdings Limited (NZX: STU) has reported its audited results for the 12 months ended 30 June 2024, delivering a solid performance for a recessionary environment, while positioning itself well for when activity returns.

CEO of Steel & Tube, Mark Malpass, commented: “In what has been a year of significant economic slowdown across New Zealand, we have delivered a solid financial result. Our focus through this downturn has been on controlling the controllables by strengthening customer relationships, maintaining market share and growing higher value products and services, managing costs and expanding our cross-sell opportunities. These strategies have not only enhanced our customer proposition but also improved the business’s operating leverage, which will drive profitability as the economy recovers. We have also built a robust balance sheet which provides optionality to further expand our growth, both organically and through acquisition.”

FY24 Performance and Results

$m / FY24 / FY23 / Change

Revenue / 479.1/ 589.1/ -18.7%

Volume (Ktonnes) / 115.5 /146.4 / -21.1%

GM$/tonne / 901 / 850 / 6.0%

EBITDA / 31.4 / 51.9 / -39.5%

Normalised EBITDA* / 35.8 / 52.9 / -32.3%

EBIT / 9.6 / 31 / -69.0%

Normalised EBIT* / 14.5 / 32.1 / -54.8%

NPAT / 2.6 / 17 / -84.7%

Net cash / 8.7 / 6.5 / 33.8%

Net operating cashflow / 42.2 / 98.3 / -57.1%

The significant decline in activity across a range of sectors as a result of economic conditions, drove a 21% reduction in volumes, with revenue down 19% to $479.1m (FY23: $589.1m). Despite challenging economic conditions, Steel & Tube has focused on maintaining market share and improving customer value, reinforcing its market position with customers for when activity returns.

Gross margin dollars per tonne^, although down on the half year, continued to improve to $901 per tonne (FY23: $850) as the company increased product share of wallet with customers, through its strategic focus on higher value products and services, and pricing disciplines.

Further inroads have been made to streamline the business, with $5m taken out of the cost base in FY24. These cost reductions have more than offset inflation with normalised operating expenses# down $3.8m or 5.2% year on year. A new cost out programme has commenced, targeting a further $5m in savings. The focus on costs through the current cycle will further expand operating leverage and the profitability of the company as activity returns.

Normalised earnings were in line with revised June 2024 guidance with Normalised EBITDA of $35.8m (down from FY23: $52.9m) and Normalised EBIT of $14.5m (down from FY23: $32.1m). The company reported a net profit after tax of $2.6m which includes one-off and non-trading costs.