KEY POINTS:
Steel & Tube Holdings chief executive Nick Calavrias says strong demand and high steel prices gave the company a big lift in the first quarter of the year and enabled it to report a 143 per cent rise in interim profit.
But Calavrias warned that the slump in global demand had already started to flow through towards the end of the half year and the second-half result would be reduced substantially due to deteriorating trading conditions.
The supplier of steel products to the building and other industries said global demand for steel in the early part of the year led to substantial shortages.
That enabled the company to withdraw from the high-volume, low-margin end of the business and focus on higher margin products.
Steel & Tube reported an unaudited after-tax profit of $20.79 million in the six months to December 31, up from $8.56 million in the same period last year.
The profit included an after-tax provision for impairment of trade receivables of $3.18 million.
Directors declared an interim dividend of 10c per share, payable on March 30.
Revenue rose 11 per cent to $273.78 million due to the effect of higher steel prices.
Calavrias said the company encountered variable market conditions.
Construction activity overall was down, led by a substantial drop in housing starts. Commercial construction activity did not suffer to the same extent, he said.
Demand from rural communities remained strong. The steel supply position improved rapidly in September when demand for steel began to stall, causing a substantial build up of inventory by $46 million.
Calavrias said there was considerable uncertainty surrounding the extent and timing of the impact of the global economic slowdown on the economy.
Although global prices for steel are in retreat in US dollar terms, the impact will be softened due to the substantial depreciation of the New Zealand dollar.
"In summary, we expect market conditions in the short term to be as tough as we have seen for a very long time," he said.
This week's announcements from the Government around infrastructure spending would be helpful. Big government projects were a big source of revenue, he said.
"The new motorway that has just opened north of Auckland was a great contract for us. We supplied all the reinforcing steel for all the over-bridges," he said.
Steel & Tube would be tendering for work on the new roading projects and that would all help as the company negotiated the wider downturn, he said.
Steel & Tube
Six months to December 31:
* Revenue: $273.79m (up 11 per cent)
* Profit: $20.79m (up 143 per cent)
* Interim dividend: 10c per share
- NZPA
