Vulcan’s net profit down 55% in ‘challenging’ conditions

Vulcan Steel's annual net profit has fallen 55%, but the company expects an improvement in activity levels next year. Photo / Supplied

Australia and New Zealand steel distributor Vulcan Steel says high interest rates and inflation helped drive its net profit down 55% to $40 million in the June year.

The company slashed its final dividend to 12¢ a share from 30.5¢ in the previous year, taking the total to 24¢, down 56%.

The result follows competitor Steel & Tube’s earnings report on Monday that showed an 85% fall in net profit to $2.6m.

Vulcan’s earnings before interest, tax, depreciation and amortisation fell 29% to $148m.

“Business conditions in 2024 remained challenging across most markets, especially in New Zealand, following a difficult 2023,” Vulcan said.

Higher interest rates affected activity levels and high inflation added to the pressure on business costs.

Despite tough conditions, Vulcan delivered a 16% increase in operating cashflow to $169m.

The company’s net debt fell by $64m to $276m.

“The Australian and New Zealand steel and metal products industry continues to be negatively impacted by higher interest rates, which have suppressed investment spending throughout 2024,” the company said.

“This has been further adversely impacted by high inflation and substantially higher borrowing costs in both Australia and New Zealand.”

The company said the Reserve Bank’s decision to bring forward the easing of its restrictive interest rate policy stance “should hopefully provide relief for the economy”.

The company expects an improvement in activity levels in 2025, but said restrictive monetary policy settings in Australia would continue to constrain economic activity.

“In the interim, our trading activity in the first half of 2025 in Australia and New Zealand is expected to remain at low levels, similar to the second half of 2024.”

Vulcan said it would carefully manage its costs.

Founded in 1995, Vulcan is an Australasia-wide industrial product distributor and value-added processor with 66 logistics and processing facilities and about 1300 employees across the company’s steel and metals divisions.

The company’s shares last traded at $8, having fallen 4.4% during the past 12 months.

On Monday, Steel & Tube said its result reflected weak economic conditions.

“While the timing and pace of an economic recovery remains unclear, our expectation is that conditions should start to improve in the 2025 calendar year,” chief executive Mark Malpass said.

Jamie Gray is an Auckland-based journalist covering the financial markets and the primary sector. He joined the Herald in 2011.