Shareholders in Steel & Tube Ltd (NZX: STU) were told at last week’s annual meeting that a turnaround for the company was now underway.
Chairwoman Susan Paterson detailed recent events following a poor financial performance that saw changes to the board and new measures, followed by a takeover offer from Fletcher Building Ltd (NZX & ASX: FBU) which was spurned.
More recently a shield against a takeover was given when BlueScope Steel Ltd (ASX: BSL) which owns New Zealand Steel – a large supplier to Steel & Tube – bought a 15.8% stake in the company previously held by Milford Asset Management.
“A shareholder recently reminded me that we projected a more positive picture at the AGM last year. Indeed, the impact of historical issues turned out to be greater than we anticipated at that time,” she said.
The tough issues of the past year saw the company write down its inventory and decided to exit the Plastics business and other impairments.
She said the recent $80.9 million rights offer allowed for a significant reduction in borrowings and “we now have a strong financial platform to continue our business growth.”
However, the share price performance has been disappointing.
She said Steel & Tube has the goal of being NZ’s leading provider of steel products and solutions. The company is the only NZX-listed opportunity for shareholders to invest in the country’s steel industry without the additional risks of a conglomerate operating multiple businesses across a number of sectors in both NZ and offshore.
Chief executive Mark Malpass said results for FY2018 were disappointing but the company was moving forward under a new strategy.
“Our business is aligned into two strong business divisions. The Distribution division includes carbon steel distribution as well as our merchant business, fasteners and stainless. These businesses all have common trading activities and having them all under one roof is important to capture synergies and trading advantages,” Malpass said.
The second and equally important division is Infrastructure which STU has split into two areas – Rollforming, and Reinforcing and Composite Flooring Decking Limited.
“These businesses are typically servicing contracting and project type markets, and products are made to order,” he said.
The NZ steel market is about 900,000 tonnes valued at $2.3 billion in value based on estimates of last year.
Malpass said with changes made positive signs were evident, taking in daily volume and sales trends on a positive trajectory with market share growth in key categories.
Steel & Tube recently launched BIM-Spec, a one-stop portal to make it easier for construction and design professionals to connect with company products.
He said good progress was being made on implementing a Lean 5s programme across the manufacturing businesses - principally the reinforcing and roll-forming businesses.
Looking ahead, Malpass said the first half of FY2019 started well with benefits already flowing through from Project Strive initiatives.
“The majority of these benefits will be seen in the second half of the year and we expect to finish the year on guidance.”