Steel and Tube Holdings' net profit slumped by 78% in the year to June 30, mainly due to weak steel prices.The steel manufacturer's profit after tax for the year was $5.7 million compared to $26.1 million in the previous year.The result included a $4.2 m
Steel and Tube Holdings’ net profit slumped by 78% in the year to June 30, mainly due to weak steel prices.
The steel manufacturer’s profit after tax for the year was $5.7 million compared to $26.1 million in the previous year.
The result included a $4.2 million one-off tax charge related to the removal of tax depreciation on buildings announced in the May budget.
Steel and Tube’s underlying profit was $9.9 million – down 62% compared with the previous year – but in line with market expectations.
Market conditions for the year continued to decline, with many sectors still deeply affected by the impact of the global economic crisis, the company said.
Domestic demand for steel products over the year was down by 6% compared with the previous year and 26% down from the highs of two years ago.
Sales, at $380 million, were $104 million lower than last year, mostly due to lower steel prices.
Conditions tentatively improving
“This financial year has been one of the most difficult trading years in Steel and Tube's history,” chief executive David Taylor, said in a statement.
However, initiatives employed by the company generated an improved second half result, Taylor, who took over as chief executive last year, said.
Steel and Tube announced a 5c a share final dividend, which was lower than many expected, bringing the full year dividend to 8.5c (compared with 19c in the previous year).
Many sectors continued to struggle with market volatility, competitive pressures and reduction in demand, it said.
World Rugby Cup boost
The construction industry was affected by weakness in property markets, and the property development sector in particular.
The exception was the contribution from construction projects associated with the Rugby World Cup 2011 and government infrastructure, including hospitals, education facilities and major roading projects.
The residential market showed signs of recovery but from a very low base and rural industries continued to demonstrate a slow recovery.
In other major sectors, oil and gas projects were reasonably strong and were likely to remain that way for the next few years, the company said.
Although the economy had entered its second year of recovery, the economic outlook from Steel and Tube’s perspective remained subdued, it said.
Global steel demand has continued to recover from the early 2009 lows, led predominantly by China.
However the industry continued to wrestle with matching production to demand, leading to temporary product surpluses or deficits.
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