Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — H1 2015 Earnings Presentation
22 slides from Steel & Tube's earnings presentation, February 2015
Slide 1: 2015 H1 Update
2015 H1 Update Dave Taylor, CEO Janie Elrick, CFO February 2015
Slide 2: Disclaimer
Disclaimer This presentation, February 2015, provides additional comment on Steel & Tube’s financial results announcement for the period ending 31 December 2014. It should be read in conjunction with the documents attached to that announcement, which highlight future outlook expectations of earnings
Slide 3: Global markets: Steel and raw material price movement
Global markets Steel and raw material price movement • Raw material prices continue to decline, with particular pressure on iron ore - Lowest price for five years - Forecast to remain low for at least the next two years • Scrap is also declining • Finished steel prices mirror the softening in raw ma
Slide 4: Global markets: Steel production and industrial activity
Global markets Steel production and industrial activity • Global steel output growth has slowed, especially in China • Soft domestic demand has increased Chinese steel exports to 94 MT in 2014, an increase of 50% over 2013 • This may abate in 2015 following removal of export incentive on boron- trea
Slide 5: Global markets: Stainless steel price and production trends
Global markets Stainless steel price and production trends • Production steady since GFC • Increase led by China – a major exporter • International prices correlate closely with nickel prices which remain volatile • Indonesia is a major supplier of nickel ore to China • Price volatility related to t
Slide 6: Global markets: Exchange rates
Global markets Exchange rates • Significant volatility in recent months • Effectively off-setting the softening in finished steel prices in Asia • Which driver will have the greatest impact? • Compounds the finished products’ pricing uncertainty 5
Slide 7: New Zealand markets: Steel volumes
New Zealand markets Steel volumes • Steel demand is steadily recovering led by construction related-products • …almost at pre GFC levels but lower than peak in 2005 • Stainless steel demand is recovering faster than general steel • Driven by food and dairy processing and viticulture Source: Stats NZ
Slide 8: New Zealand markets: Key sector trends – building consents
New Zealand markets Key sector trends – building consents ($m) • During 2014 non-residential consents increased 21% to $5.1 billion • Areas contributing to the increase are Canterbury, Auckland, Wellington and Otago • Residential consent numbers during 2014 rose 16% (21% by value) over last year and
Slide 9: New Zealand markets: Key sector trends – actual building work
New Zealand markets Key sector trends – actual building work ($m quarterly) • Non-residential work increased by just 7% over the year, led by Canterbury, which increased by 23% • The rest of NZ witnessed marginal improvement, and only in recent periods • While residential consents are increasing, ac
Slide 10: New Zealand markets: Key sector trends – rural
New Zealand markets Key sector trends – rural • After record pay-out (including dividend) of $8.50 / Kg last year, Fonterra has reduced the pay-out to $5.00 this year • Volumes will also reduce due to drought • It is expected that pay-out during the following year will remain depressed • The reduced
Slide 11: New Zealand markets: Key sector trends – manufacturing
New Zealand markets Key sector trends – manufacturing ($m) • Volatility continues from quarter to quarter • Excluding food, activity increased by 4% in the year ending Sep 2014 • A similar increase was registered for metal products and equipment manufacturing sub-sectors Source: Stats NZ 10
Slide 12: Business performance – revenue and profit
Steel & Tube Business performance – revenue and profit Source: S&T financial reports 11
Slide 13: Three main contributors to increase in profit
Three main contributors to increase in profit • The Group contribution reflects improvements in both volumes and prices 12
Slide 14: Business performance – operating cash
Steel & Tube Business performance – operating cash • Contribution from: - Improved debtor management - Increased trading activity • Moderated by increase in inventory to service increased demand Source: S&T financial reports 13
Slide 15: Business performance – balance sheet and gearing
Steel & Tube Business performance – balance sheet and gearing Source: S&T financial reports 14
Slide 16: Notes to the Financials
Notes to the Financials • Changes to estimated life of assets: - Review of “heavy machinery” - Machinery estimated life increased from 10 to 20 years; machinery electronics decreased from 10 to 3 years. Applied prospectively only - Financial impact: reduction in depreciation $754k for half year; $1.
Slide 17: S&T Stainless evolution
S&T Stainless evolution Delivering on the opportunities • Integration has created the No.1 stainless player with a nationwide footprint • Stainless market is improving across all sectors and product groups • COMFLOR has a strong market presence and continues to benefit from growing construction acti
Slide 18: Business performance
Steel & Tube Business performance • The company continues to demonstrate earnings and revenue momentum while making significant investments in facilities, plant and connectivity to improve the customer experience • Trading result for the six months to 31 December 2014 is an after-tax profit of $10.8
Slide 19: Business initiatives
Steel & Tube Business initiatives • Substantial ($30 million) reinvestment underway. Includes three new purpose-built facilities: - Palmerston North brings Processing, Distribution and Stainless operations under one roof. Opened November 2014 - Savill Drive will augment processing capability and eff
Slide 20: Growing New Zealand
Steel & Tube Growing New Zealand Our One Company ethos, creativity and innovation sees S&T contributing to Kiwi housing, commercial, infrastructure, cultural and leisure projects: • Auckland: Waterview Connection • Canterbury: Burwood hospital; Central Plains Irrigation Scheme • Regions: Govett Brew
Slide 21: Outlook
Steel & Tube Outlook • Global geo-political uncertainties remain • Falling commodity and oil prices could slow global growth - Forex rates volatility - Chinese economy slowing down - Steel prices to remain weak on the back of over-supply • New Zealand’s economy continues to advance • Barring any unf
Slide 22: Thank you
Thank you
Steel & Tube Holdings — H1 2015 Earnings Presentation on 6ix