Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — FY2018 Earnings Presentation
30 slides from Steel & Tube's earnings presentation, Aug 29, 2018
Slide 1: FY18 Annual Results Presentation
STEEL & TUBE HOLDINGS LIMITED FY18 ANNUAL RESULTS PRESENTATION 29 August 2018 1
Slide 2: FY18 Financial Summary
FY18 FINANCIAL SUMMARY No change from unaudited results announced 7 August 2018 Revenues impacted by issues with ERP system implementation affecting customer service FY18 FY17 $53.8m of non-trading impacts from legacy Revenue $495.8m $511.4m issues recognised in FY18 following detailed review EB
Slide 3: FY18 Key Events
FY18 KEY EVENTS OPERATIONAL KEY EVENTS FINANCIAL EVENTS Refreshed Board and Management team Revised guidance resetting the business, 23 May 2018 Deployment of new ERP (Enterprise Resource Planning) IT system - implementation issues in Results slightly ahead of guidance - Revenue FY18, now resolv
Slide 4: Our Business
OUR BUSINESS Processing and distributing New Zealand’s most comprehensive range of processed steel Value chain position Steel & Tube locations Mining suppliers Imports from small number of pre-qualified Asian Primary processing Nationwide footprint with 40 - Primary processing of steel in New
Slide 5: Our Business Divisions
OUR BUSINESS DIVISIONS Distribution Infrastructure(1) Products are sourced from preferred steel mills and distributed Products are processed before sale and typically on a contract or through Steel & Tube’s national network of branches project basis, including onsite installation services FY18
Slide 6: Strategic Initiatives
STRATEGIC INITIATIVES Our goal is to be the leader in buying, selling, processing and placing steel products in New Zealand 6
Slide 7: Priority Focus: People, Quality, Health & Safety
PRIORITY FOCUS: PEOPLE, QUALITY, HEALTH & SAFETY S&T EMPLOYEE LAG INDICATOR 12 MONTH Board Quality, Safety and Environment MOVING AVERAGE FREQUENCY RATES Committee 10 Strengthened quality and safety 8 function within the company, direct report to the CEO 6 Monthly stewardship covering lead and
Slide 8: Change Programme
CHANGE PROGRAMME Embarked on an extensive company-wide reset to drive long-term sustainable earnings improvement in late-2017 Detailed Organisational Change Programme and Operational Reset Refreshed Leadership Review Initiated Susan Paterson and Mark Malpass’ appointments to the Board Late calendar
Slide 9: Project Strive
PROJECT STRIVE Business Transformation Initiatives FY18 FY19 FY20 FY21 Key Value Drivers Commitment Group-wide update to ISO 9001:2015 Disciplined company-wide to safety and practices quality Third party audits of steel mills Customer promise Reputation Traceability enhancements including barc
Slide 10: FY18 Non-Trading Impact
FY18 NON-TRADING IMPACT As previously announced, the detailed organisational review uncovered a number of legacy issues and unusual transactions, materially impacting FY18 earnings FY18P EBIT Impact Description Inventory write-downs $(24.0)m New ERP increased visibility of inventory management E
Slide 11: Earnings Before Interest and Tax (EBIT)
EARNINGS BEFORE INTEREST AND TAX (EBIT) Revenues impacted in FY18 by issues with ERP system implementation affecting customer service $53.8m of non-trading impacts recognised as part of clearing up legacy issues Management are now addressing issues to improve customer service and stock availab
Slide 12: Balance Sheet
BALANCE SHEET $Millions FY18 FY17 FY18 balance sheet reflects Inventories 116.0 143.1 inventory and intangible asset Debtors 99.2 93.5 write downs, exit of S&T Plastics, Trade and other Creditors (49.9) (54.4) and property sales Working Capital 165.4 182.2 Net debt reduction benefited from sales
Slide 13: Capital Expenditure
CAPITAL EXPENDITURE CAPITAL INVESTMENT Acquisitions totalling $80 million over a 60 four- year period 50 S&T Stainless (FY14) MSL (FY16) S&T Plastics (FY16) 40 CFDL (FY17) 30 Capex funded through a mix of debt and operating cashflow 20 $Millions FY18 end of a high capital investment 10
Slide 14: Capital Structure Policy
CAPITAL STRUCTURE POLICY S&T revised annual capital structure targets Capital Metrics FY18 FY17 Net debt to net debt + equity within target range of < 30% - 35% Net Debt: Net Debt + Equity 37.7% 37.4% Net debt to EBITDA < 2.0x (1) Net Debt: EBITDA (2) 4.6 3.3 Post capital raise S&T expects to
Slide 15: Operating Segments
OPERATING SEGMENTS DIVISION REVENUE Infrastructure 600 Distribution Revenue impacted significantly 500 from ERP implementation as well 400 as volume and margin pressures; $ Millions 300 this was partially offset by additional CFDL revenue and a 200 number of large projects for S&T 100 Plastics in th
Slide 16: Distribution
DISTRIBUTION REVENUE Distribution’s performance was materially impacted by ERP implementation issues, which are now resolved The majority of non-trading costs consisted of impairment of $288.3m inventory following extensive stock takes and detailed 58% review, as well as business rationalisation
Slide 17: Infrastructure
INFRASTRUCTURE REVENUE Non- trading adjustments including the impairment of Plastics and inventory Reinforcing repositioned as a leader in quality products and $207.5m 42% service Roll-forming overcame ERP implementation issues CFDL retained strong performance albeit with some softening in t
Slide 18: Operating Outlook
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Slide 19: Operating Sectors
OPERATING SECTORS Well balanced across construction, manufacturing and rural sectors Construction Exposure to infrastructure, commercial (non- residential) and residential construction A highly competitive market with the North Island experiencing high demand Construction expected to drive rei
Slide 20: Construction Sector
CONSTRUCTION SECTOR Forecast is for solid long-term growth Growth from the prior year of 10% in non-residential BUILDING CONSENTS BY REGION (1) consents and 7.9% in new dwellings; North Island’s (2014 - 2018 Annual) 15 main centres and the regions driving demand 10 The National Construction Pipe
Slide 21: Operating Environment
OPERATING ENVIRONMENT GLOBAL CRUDE STEEL ANNUAL PRODUCTION (1) 900 Global Steel Market Trend Global crude steel production increased by 5.2% to 1.729b tonnes 800 during 2018 China’s increased output of 5.7% over 700 Tonnes Million the year which was mainly consumed domestically East Asian stee
Slide 22: Positive Impact of Initiatives Now Being Seen
POSITIVE IMPACT OF INITIATIVES NOW BEING SEEN Steel & Tube has begun to see positive results from the implementation of its change programme – specifically increasing both volumes and sales Distribution Infrastructure Distribution (combined Heritage Distribution, Stainless and Roll-forming (Roofing,
Slide 23: FY19 Outlook
FY19 OUTLOOK FY19 EBIT guidance of $25m Legacy issues behind us and major financial restructuring completed Beginning journey to significantly improved operating and financial performance Recent increases in volumes are encouraging as ERP stabilised and focus has shifted to servicing customers
Slide 24: Medium Term Objectives
MEDIUM TERM OBJECTIVES Normalised EBIT of $35m to $40m expected in the next three years Commitment to quality and customer service Leverage technology to harness sales and cost saving opportunities Improve working capital through disciplined practices and enhanced visibility Recognise and nu
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Slide 26: Appendix: Full Year Performance
APPENDIX: FULL YEAR PERFORMANCE REVENUE EARNINGS BEFORE INTEREST AND 560 TAX (EBIT) 40 30 520 20 10 480 - (10) $Millions $Millions 440 (20) (30) 400 (40) FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 FY18N NET PROFIT AFTER TAX 30 OPERATING CASHFLOW 30 20 20 10 10 - - $Millions (10) $Millions (20
Slide 27: Appendix: FY18 Half Year Performance
APPENDIX: FY18 HALF YEAR PERFORMANCE H2 Normalised EBIT of $1.7m was $13.1m lower than NORMALISED EBIT 2018 H1 vs H2 H1 Normalised EBIT of $14.8m 20 Shortfall largely due to impact of ERP implementation issues in the third quarter, losses made by S&T Plastics $Millions in H2 reflecting the proje
Slide 28: Non-GAAP Financial Information
2 8 NON-GAAP FINANCIAL INFORMATION Non-GAAP financial information: Steel & Tube uses several non-GAAP measures when discussing financial performance. These include normalised EBIT and working capital. Management believes that these measures provide useful information on the underlying performance of
Slide 29: Glossary of Terms
2 9 GLOSSARY OF TERMS Business rationalisation: Includes business change costs incurred to rationalise Steel & Tube’s property footprint including onerous leases, rationalisation and re-organisation of manufacturing operations and delivery logistics operations, and costs incurred in reviewing and st
Slide 30: Disclaimer
3 0 DISCLAIMER This presentation has been prepared by Steel & Tube Holdings Limited (Steel & Tube) and supplements our full year results announcement dated 29 August 2018. The information in this presentation is of a general nature only and should not be read in isolation. It should be read subject