Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — FY2017 Earnings Presentation
31 slides from Steel & Tube's earnings presentation, August 2017
Slide 1: 2017 Annual Update
2017 Annual Update Dave Taylor, CEO Steve Armstrong, Interim CFO August 2017 This presentation, August 2017, provides additional comment on Steel & Tube’s financial results announcement for the period ending 30 June 2017 . It should be read in conjunction with the documents attached to that announce
Slide 2: FY17 Financial Summary
FY17 Financial Summary 600 516.0 511.4 500 Positive result although below company’s high expectations 400 Benefitted from acquisitions and continuing focus 300 on margin management and cost efficiencies 200 Several ‘ring fenced’ issues affecting results for $Millions Reinforcing and S&T Plasti
Slide 3: FY17 Business Highlights
FY17 Business Highlights Stronger Business aligns to two operating groups: Infrastructure and Distribution organisational One Company ethos generating strong front-end synergies structure Common platforms enabling operational and structural synergies Strengthening of business management team
Slide 4: Strategic Initiatives
Strategic Initiatives Stronger organisational structure Business aligns to two operating groups Infrastructure group established from former processing business Infrastructure Distribution Strengthened management team within Steel and plastic is processed the Infrastructure group, with new Produ
Slide 5: Strategic Initiatives
Strategic Initiatives Acquisitions creating market leading positions Four year acquisition programme has strengthened company, diversified revenue and provided further opportunities for growth Funded mostly from a combination of debt and operating cashflows FY16 Acquisitions (MSL and S&T Plast
Slide 6: Strategic Initiatives
Strategic Initiatives Modernisation and optimisation of property portfolio Property initiatives reflect One Company philosophy and acquisition growth: Consolidation and optimisation of multiple businesses in close location Allows for operational efficiencies and streamlined teams working togethe
Slide 7: Strategic Initiatives
Strategic Initiatives Investment into technology Major multi-million dollar, 2 year ERP development project in final stages: Successful pilot in Q2 FY17; further Company rollout over Q1 FY18 Will deliver an effective and efficient supply chain and greater value for customers Removes multiple dif
Slide 8: Operational and Business Performance
Operational and Business Performance 8
Slide 9: Operating Environment
Operating Environment Global Steel Market Long Term Trends: Multi year decline in steel prices has major impact on S&T gross profit Global steel prices have been on upwards trajectory since Jan 2016 Chinese capacity reductions coupled with increasing demand – China reducing exports and prices
Slide 10: Operating Sectors
Operating Sectors Operate primarily across three sectors Group Sector Exposure FY17 Provides diversification of revenue and commodity cycles Other Construction: Wholesale Buoyant, notably in Auckland and infrastructure. Intensely competitive Sector grappling with limited resources, project Const
Slide 11: Operational Performance Overview
Operational Performance Overview Several businesses delivered record or near record revenue and EBIT performances Final weeks of Q4 proved more challenging than expected: – Difficulties fulfilling some project commitments lead to cost overruns and provisions for onerous contracts – Multiple proj
Slide 12: Business Overviews
Business Overviews Infrastructure Performing well and achieved first earn out milestone in March 2017 CFDL External project delays have pushed some expected Q4 activity into the new financial year Margin squeeze across some contracts as steel prices firm Two contracts have proven more compli
Slide 13: Business Overviews
Business Overviews Distribution Increased market share levels at the end of FY16 Increasing steel prices - focus on pricing resulted in 2% margin improvement - partially offsetting volume reduction Distribution Monitoring balance between price and market share New ERP will improve effectiven
Slide 14: Financial Results
Financial Results 14
Slide 15: Revenue and Profit
Revenue and Profit Revenue marginally down, NPAT up 3.1% YoY excluding gain on sale Revenue Revenue impacted by falling global steel 600 prices since 2012 502 516 511 500 441 393 Revenue marginally down on FY16, mainly 400 due to reduced Distribution volumes. Gross 300 margins have improved by ~
Slide 16: Earnings Before Interest and Tax (EBIT)
Earnings Before Interest and Tax (EBIT) 2% ahead of FY16, excluding gain on sale Distribution: Margin focus leading to improved contribution Infrastructure: Primarily Reinforcing contract issues, partially offset by positive performance in wire products S&T Stainless: Strong EBIT performance
Slide 17: Costs
Costs Acquisition growth and one-off costs Acquisitions: Impact of larger business portfolio(MSL and S&T Plastics FY, CFDL 8 months) Legal includes Commerce Commission costs and M&A expenses Building costs: Lease and premises costs Restructure – Distribution and S&T Stainless Efficiencies
Slide 18: Investment into Growth
Investment into Growth Capital Expenditure Capex funded largely by a mix of debt and operating cashflow 50 Acquisitions $80 million over a four year 45 period: S&T Stainless (FY14), MSL (FY16), S&T 40 Plastics (FY16), CFDL ((FY17) 35 History of under-investment in property, 30 equipment and IT
Slide 19: Dividends and Returns
Dividends and Returns FY17 Total Dividend 16.0 cps Cash Dividends Paid and Operating Cashflow Dividends – maintained at between 70% to 30 85% of earnings whilst 25 – Securing acquisition growth and capital 20 investment 15 – Market challenges with steel prices low $Millions 10 5 and competition in
Slide 20: Balance Sheet
Balance Sheet Strategic investments made in FY17 $M FY16 FY17 Inventory higher – acquisitions and timing of purchases for specific projects Inventory 129.4 143.1 Debtors have increased in line with acquisitions Debtors 89.8 93.5 Change in accounting policy – property now held Trade and other C
Slide 21: Strategy Update
Strategy Update Building on One Company ethos, focus on adding further customer value One Company focus has positioned Refreshed strategy announced in FY16: S&T strongly for future growth: Increasing focus on initiatives that leverage Modern and more efficient S&T’s size, geographical presence a
Slide 22: Moving Forward
Moving Forward Strategic Initiatives for FY18 Technology Rollout of ERP system underway, enabling an improved customer offering Optimise the balance sheet Financial Strategic review of property assets and ownership vs lease position Continue to optimise geographic network Continue to ident
Slide 23: Outlook
Outlook Improving performance Global • World steel demand remains soft, with oversupply in both raw materials and finished steel, encouraged by prices increased in early Markets 2016, iron ore firming, and steel pricing following • China commitment to remove excess/aged capacity Local • The New Zeal
Slide 24: Global Markets
Global Markets Steel production Global steel output did not increase in 2016, but has started rising in 2017 The increase has come from China as well as a few other countries India continued to increase output and is the 3rd largest producer after Japan Chinese domestic demand for steel has
Slide 25: Global Markets
Global Markets Steel and raw material price movement Additional iron ore production continues to come on line increasing supply Prices have held due to demand from China with increased steel production Coking coal prices were very volatile Finished steel prices have trended up steadily since
Slide 26: Global Markets
Global Markets Stainless steel prices and production Production rose in 2016 after stalling in 2015 China is the leading producer and is following the global trend Demand forecast remains positive Stainless steel has been out-performing other metals in long term growth Prices correlate clo
Slide 27: Global Markets
Global Markets Exchange rates The NZD has appreciated in recent months against key currencies Helped temper the volatility in global steel prices Remains elevated against the AUD Source: ANZ Bank 27
Slide 28: New Zealand Markets
New Zealand Markets Material volumes Total steel demand is steady year on year Construction aligned products continue to grow Stainless steel demand have bounced back to normal levels aided by recovery in Dairy Fastenings market has held steady and less vulnerable to volatility Source: Stats
Slide 29: New Zealand Markets
New Zealand Markets Key sector trends – building consents ($m and square metres) Year to June 2017 Non Residential building consent by floor area reduced 13% compared to PCP This was due to a 29% & 26% drop in Canterbury & Auckland respectively Although the current $ values are 48% higher, flo
Slide 30: New Zealand Markets
New Zealand Markets Key sector trends – rural With international dairy prices recovering Fonterra has revised their pay-out, including dividend after retention, to $7.15/ Kg of milk solids for the 2017/ 18 season At these levels funds will be available at farms for investments The increase in
Slide 31: New Zealand Markets
New Zealand Markets Key sector trends – manufacturing ($m) Generally volatile, but solid growth from non food and petroleum sectors Equipment and machinery manufacturers are at pre GFC levels Metal producers remain relatively subdued Export markets for manufactured goods remain resilient in