Vulcan Steel slashes dividend as earnings drop 30pc in first half

Vulcan Steel's earnings fell in the first half of the year.

Vulcan Steel expects to see an improved second half of the year after difficult trading conditions drove the Australasian steel distributor’s earnings down by 30 per cent in the first half, leading to a 51 per cent reduction in its interim dividend.

The company’s earnings before interest, tax, depreciation and amortisation fell to $81.8 million in the half from $115m in the previous corresponding period, while its net profit after tax dropped by 52 per cent to $26.1m.

Revenue fell by 12 per cent to $564m but Vulcan’s gross margin fell by just half a percentage point to 35.4 per cent.

The company halved its interim dividend to 12c from 24.5c.

Managing director and chief executive Rhys Jones said following a difficult 2023 year, business conditions remained challenging in first half, especially in the New Zealand market and the steel segment in Australia.

“Higher interest rates continued to impact on business activity and investment appetite,” he said.

High inflation also added to the pressure on business costs.

Jones said Vulcan was positioned to capitalise on a recovery in the cycle and would “continue to invest in the business appropriately for growth”.

Trading was variable in the first six months of the current financial year, with some weakness observed in the October-to-December 2023 quarter.

“However, sales activity is showing early signs of stabilising at current levels,” Jones said.

Customer inquiry levels had been increasing in certain segments.

“Lead business activity indicators for New Zealand point to an improving outlook for 2024, although the timing and magnitude of a recovery remains uncertain.

“Our expectation is for New Zealand trading volume to begin to recover from the second or third quarter of the 2024 calendar year,” Jones said.

In Australia, expectations were for Vulcan’s metals segment to remain steady and improve during the 2024 calendar year.

Vulcan’s Australian Steel segment volume would likely continue to be challenging, especially in Victoria in the near term.

In August 2022, Vulcan expanded its metals segment product offering with the acquisition of Ullrich Aluminium.

The stock listed on the NZX and ASX in November 2021, debuting locally a $7.50 a share.

Vulcan shares closed on Monday at $7.75, having dropped by 19 per cent over the last 12 months.

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