Steel & Tube lifts profit 15% as Tata Steel acquisition boosts sales
Steel & Tube [NZX: STU], which manufacturers steel building products, lifted annual profit 15 percent as its sales were boosted from its April purchase of a stainless steel goods maker.
Profit rose to $17.9 million, or 20.4 cents a share, in the 12 months ended June 30, from $15.6 million, or 17.8 cents, a year earlier, the Lower Hutt-based company said in a statement. Sales increased to $441.4 million from $393 million, in part boosted by a $12.9 million contribution from its new business, S&T Stainless.
The company bought Tata Steel (Australasia), the local division of the Indian manufacturer now renamed S&T Stainless, for $28.1 million in April, giving it market share of stainless, engineering steel and floor decking products in New Zealand.
Steel & Tube is a key beneficiary of building activity in Auckland and the Canterbury rebuild, particularly in the CBD rebuild which will use more steel. In anticipation of increased activity it had invested in new plants and equipment, including two in Auckland and one in Palmerston North. The company is also part of government infrastructure projects, including the Auckland Waterview Connection, Wellington's National War Memorial Park and underpass and Burwood Hospital in Christchurch.
"Economic activity, and consequently volumes, improved across most sectors although competition remains intense, restraining margins," chief executive Dave Taylor said. "Globally the steel industry remains challenged: over-capacity is a continuing issue alongside increasing geopolitical risks and reducing economic forecasts across several regions."
The company didn't give specific guidance, but Taylor said economic activity across the country would see Steel & Tube "continue to deliver improving results".
It announced a final dividend of 9 cents, payable on Sept. 30 with a Sept. 12 record date, from 8.5 cents the previous year.
Shares of Steel & Tube last traded at $2.90, and have risen 13 percent over the past 12 months. The stock has an average recommendation of 'sell' based on four analysts surveyed by Reuters, with a median price target of $3.16.