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Vulcan Steel has reported a steady first-half net profit of $54m, with trading from the newly acquired Ullrich Aluminium partly offsetting weaker volumes.
The company lifted its net profit outlook slightly for the full year but said current weather events could disrupt trading in the second half.
The sharemarket clearly did not react well to the result, the stock dropping 84c or 8.8 per cent to $8.72 in afternoon trade.
The Australia and New Zealand steel distributor said its first-half profit fell by 22 per cent, also to $54m from $69.7m when adjusting for significant items – the gain on an acquisition and the company’s listing costs.
Adjusted EBITDA was $115m, down 3 per cent from the previous corresponding period.
Vulcan said the addition of five months of trading of the newly acquired Ullrich business partially offset weaker volumes in pre-existing businesses, increasing operating cost pressures and higher financing charges.
Based on current views of market conditions and recent trading, Vulcan narrowed its 2023 EBITDA guidance range to $215m-$230m from a previously advised $215m-$235m.
“We expect 2023 net profit to be between $95m and $109m from previously $93m and $107m,” the company said.
“The focus remains on continuing to improve our high service level across Vulcan’s growing and diverse customer base in a cost and capital efficient manner.”
Accordingly, Vulcan declared a 24.5c dividend, down 11 per cent from the 27.5c dividend paid for the previous first half.
“The demand conditions observed in the first half are not expected to materially improve in the second half across the Australian and New Zealand markets,” managing director and chief executive Rhys Jones said.
Vulcan Steel reported a steady first-half net profit of $54m. Photo / Supplied
“Based on current monetary policy settings, current business confidence levels and the uncertainty surrounding New Zealand’s national election in October 2023, there are risks of further weakening in the New Zealand economy,” he said.
“The recent weather-related events in the northern region of New Zealand may cause ongoing disruption to trading activity in the short term,” he said.
Vulcan’s operating cost base across Australia and New Zealand faced some ongoing inflation pressure.
Vulcan’s aluminium business has performed better in the first half of 2023 than its initial expectations, he said.
Demand for steel and metal products globally in calendar year 2023 is expected to increase from levels observed in year 2022, as business activity in China begins to recover from Covid-19, Jones said.
Greg Smith, head of retail at Devon Funds, noted the Vulcan’s narrower guidance and said there probably have been earnings downgrade for the company were it not for contribution from the the recently-acquired aluminum business.
Smith, noting Fletcher Building’s earnings downgrade on Monday, said the latest earnings season had not got off to the best of starts.
“The market is a bit nervous about the cyclical outlook for these industries,” he said.
The Australian and New Zealand steel distributor listed on the ASX and NZX in November 2021.
