Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — FY2024 Earnings Presentation
47 slides from Steel & Tube's earnings presentation, Aug 26, 2024
Slide 1: FY24 Results Presentation
FY24 Results Presentation For 12 months ended 30 June 2024 26 August 2024
Slide 2: Well positioned for when activity returns
Well positioned for when activity returns
Slide 3: Inherent operating leverage, net cash, optionality for M&A
• Inherent operating leverage • Through cycle cost management • Net cash on balance sheet (no borrowings) • Optionality for M&A • Strong long-term drivers
Slide 4: Results at a glance
Results at a glance Continued solid performance in a more challenging trading environment • Normalised EBIT Revenue Volume Normalised EBITDA Normalised supported by successful EBITDA EBIT cost out programme $479.1m 115,535t $31.4m -18.7% -21.1% $35.8m -39.5% $14.5m • Focussed on customer -32.3% -54.
Slide 5: Key messages
Key messages Well positioned when activity returns Current economic conditions provide market opportunities, while inherent operating leverage enables strong earnings growth as the economy improves and volumes return Economic headwinds Strategic investment • Economic conditions have impacted sales •
Slide 6: Economic cycle
Economic cycle
Slide 7: Short term economic impacts
Short term economic impacts Build share of sales in growth sectors Manufacturing Soft on the back of subdued domestic and international demand Slow second half of FY24 as projects continue to be delayed or paused in Commercial anticipation of cheaper funding available in the coming months Slowdown i
Slide 8: Manufacturing and Commercial
Manufacturing and Commercial Manufacturing and commercial construction slow Performance of Manufacturing Index (PMI) Manufacturing 34% of group sales 60 • Manufacturing sales have reduced by 21% in FY24 50 • Demand weakness domestically and internationally 40 • PMI continues to show weakness in the
Slide 9: Residential and Infrastructure
Residential and Infrastructure Residential in decline, delayed infrastructure Residential Consents 60 8 Residential 14% No. Consents (000's) of group sales 50 7 SQM (million) 40 6 • Residential sales reduced by 15% in FY24 30 5 • Residential consents have reduced by 26% YoY to June 20 4 • Activity l
Slide 10: Where are we in the cycle
Where are we in the cycle Diversified product portfolio across sectors Commercial Resellers Infrastructure Residential Manufacturing 10
Slide 11: Business strategy
Business strategy 11
Slide 12: Strengthening the core
Strengthening Continue to Cross sell products and services the core strengthen • Broad product range provides competitive advantage • Increased share of wallet per customer the core • Tools developed to understand purchasing patterns and identify opportunities • Disciplined approach being applied to
Slide 13: Cross sell products and services
Cross sell products and services Broad product range provides competitive advantage • Bringing product combinations together makes life easier for customers and significantly increases our share of wallet per customer Increasing our category share per customer 18% 22% 24% 30% 10% FY23 FY24 12% 16% 2
Slide 14: Operating leverage
Operating leverage Controlling the controllables Scenario modelling FY24’s operating leverage at increasing product volume levels Inherent operating leverage Volume EBIT • Large proportion of costs fixed • EBIT scales disproportionately to volume Historical Volume scenarios • Lift in market activity
Slide 15: Grow high value products, services and sectors
Grow high value products, Strategic investments services and • Continuously exploring investment opportunities sectors • Well developed growth / M&A investment criteria • Our focus is on maximising shareholder value Strategic pathways • High value products, range Capital management extensions, diver
Slide 16: Focused on two key pathways
Focused on two key pathways Organic growth and M&A activity Growth Criteria M&A Criteria • Industry aligns with current Additional criteria • Products that fit into our existing operations, enhancing capability • Procurement distribution network leveraging or range • People our national footprint •
Slide 17: Ongoing M&A
Ongoing M&A Over the past two years Steel & Tube has been successfully growing the business through smaller M&A with 2 acquisitions completed - 17 companies have been reviewed with 8 currently under active consideration Gate 0 Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Gate 6 Approval to Resources Nonbindin
Slide 18: Capital management - well positioned
Capital management - well positioned Group balance sheet summary Net (Debt)/ Cash Position over 10 years 100 • Positioned for M&A growth, navigating the downturn 50% and other opportunities when the cycle turns Covid-19 50 • Net cash (no borrowings), $100m facility in place to Net Debt / Equity fund
Slide 19: Financial results
Financial results 19
Slide 20: FY24 financial performance
FY24 financial $m FY24 FY23 Var performance Revenue 479.1 589.1 (18.7%) Volume (Ktonnes) 115.5 146.4 (21.1%) Group financial summary GM$/tonne 901 850 6.0% • Volumes continue to be suppressed in a recessionary environment EBITDA 31.4 51.9 (39.5%) • Revenues reflect decreased volumes with some Normal
Slide 21: Resilient revenue
Resilient revenue Sales & Volume 700 200 Continued focus on customers, growth of 600 150 500 high value products and services, and Tonnes (000's) 400 Sales ($m) pricing disciplines 300 100 200 50 Reduction in volume and revenue compared to FY23 100 driven by challenging economic conditions. - - FY20
Slide 22: Continued growth in margin
Continued growth in Margin $/tonne 1,238 margin 1,300 1,142 1,057 1,100 888 885 901 850 • Continued focus on Gross Margin $/tonne 900 799 through customer value add, cross selling, 700 581 621 pricing discipline and cost control 500 • Strategic focus on higher value products and FY20 FY21 FY22 FY23
Slide 23: Normalised operating expenses
Normalised operating expenses Cost out programme targeting $5m of operating expense savings in FY24 successfully offset inflationary pressures • Ongoing focus on streamlining operational costs • FY24 normalised operating expenses reduced by $3.9m • Cost initiatives focussed on back office functions,
Slide 24: Normalised EBIT
Normalised EBIT Volume impacts partially offset by margin improvements and operating cost reductions • FY24 Normalised EBIT $14.5m – in line with guidance • Volume decline consistent with New Zealand’s recessionary environment • Focus on higher value products, improved pricing disciplines, leveragin
Slide 25: Balance sheet summary
Balance sheet summary $m FY24 FY23 Var Built a robust balance sheet for more challenging economic cycle, capable of Trade and other receivables 68.5 79.3 (13.6%) investing in growth Inventories 121.3 139.2 (12.9%) Trade and other payables (56.7) (69.4) (18.3%) Working Capital 133.1 149.1 (10.7%) • C
Slide 26: Inventory management
Inventory management Managing inventory levels carefully to ensure best use of working capital • Inventory levels normalised at the end of FY23 • FY24 inventory in line with activity, coupled with further improvements and optimisations • Unit finished product prices remain at elevated levels • Activ
Slide 27: Cashflow
Cashflow • Cash collections remain high in a softened operating environment • Careful inventory management and supply chain optimisation • Dividends of $13.3m paid during FY24 • Lease payments have increased by $1.1m in FY24 27
Slide 28: Capital expenditure
Capital expenditure Disciplined capital management in a challenging environment • FY24 capex of $9.5m (FY23: $6.2m) • Priority capital allocation to maintenance spend (29.5%), Capital Expenditure and strategic investments (38.4%) 12 10 • Strategic investments include new purlins machine in 10 8 Auck
Slide 29: Investor returns
Investor returns • Final dividend of 2.0 cents per share – above 60%- Gross Dividend Returns 80% target range reflecting confidence in the 10 14% company’s future 12% 8 • Attractive gross dividend yield1 of 9.7% 10% • Earnings per share: 1.6 cents per share 6 8% • Net Tangible Assets per share: $1.1
Slide 30: Moving forward
Moving forward 30
Slide 31: Economic drivers and trends
Economic drivers and trends Extract from New Zealand Infrastructure Commission Strategy Infrastructure Work Put in Place* 10 8 $bn 6 4 2 Work Put in Place* 14 Residential Non Residential 12 10 8 $bn 6 4 2 - *Data and forecasts sourced from Infometrics 31
Slide 32: Medium term economic driver and trends
Medium term economic driver and trends Building share of sales in growth sectors Diversified product portfolio well positioned to capture upside Poised to grow supported by recovery of the domestic construction sector and Manufacturing export markets Commercial Interest rate cuts over the coming yea
Slide 33: Market outlook and FY25 outlook
Market outlook FY25 outlook • Economic cycle likely to remain challenging in Support our customers through the cycle and near term, improvements expected in business explore growth opportunities in a difficult sentiment as interest rates and inflation moderate market • Weak economic conditions shoul
Slide 34: Actively managing market challenges
Actively managing market challenges Market FY24 FY25 FY24 response Challenges • Customer focused, resilient and sustainable business platform Slowing High Med • Growth strategy focused on high value products and services economy • Diversified business with limited exposure to any one sector • Reduce
Slide 35: Summary
Summary • Economic head winds • Strategy delivering results • Well positioned for economic improvement • Further growth supported by organic initiatives and M&A investment • Long-term drivers support future growth 35
Slide 36: Discussion
Discussion
Slide 37: Appendix
Appendix 37
Slide 38: Non-GAAP financial information
Non-GAAP financial information Period ended 30 June EBITDA EBIT $000s FY24 FY23 FY24 FY23 Reported 31,415 51,876 9,569 31,009 Project Strong costs 2,701 - 3,192 - Business restructuring costs 550 - 550 - Loss on de-recognition of finance lease receivable - 128 - 128 NZ IFRS 16 reversal of impairment
Slide 39: Business performance
Business performance Resilient performance in a softer market Distribution – high volume business Distribution FY24 FY23 • Solid performance despite market conditions % of Group revenue 57.8% 60.5% • Benefiting from inventory management, pricing and supply Revenue ($m) 276.8 356.3 chain disciplines
Slide 40: Steel & Tube
Steel & Tube • One of New Zealand’s leading providers of steel solutions • A proud New Zealand company, with over 70 years 3 of trading history • New Zealand’s most comprehensive range of steel products, services and solutions 4 • Stable of best-in-class businesses are some of this country’s leading
Slide 41: Our business divisions
Our business divisions Distribution Infrastructure Products sourced from preferred steel mills and Products processed before sale, on a contract or distributed through our national network project basis, including onsite installation services Steel Piping Systems Chain & Rigging Aluminium Roofing Co
Slide 42: Primary product and service offering by participants
Primary product and service offering by participants Reticulation Engineering distribution Reinforcing Aluminium processing processing Fasteners Stainless Roofing Plate Steel Wire steel steel steel Coil Fire Steel & Tube ✓5 ✓5 ✓5 ✓5 ✓5 ✓5 ✓5 ✓5 ✓5 ✓5 ✓5 Fletcher Steel ✓j ✓5 ✓5 –5 ✓5 –5 ✓5 ✓5 ✓5 –5 –
Slide 43: Customer, employee and sustainability update
Customer, employee and sustainability update • Customer satisfaction remains at high Customer Satisfaction (NPS2) Employee Safety Measure (TRIFR1) Industry average: 32 levels due to our focus on making life 3 60 easy for customers, offering best-in-class 40 42 50 1.86 2 customer experience and solut
Slide 44: Recent growth initiatives
Recent growth initiatives Plate Processing Daily Revenue Plate Processing • Plate processing provides value add service to the 30 business improving margin capture on plate products 25 • Unprocessed plate market contracted due to recessionary20 15 impacts, processed plate investment outperforming 10
Slide 45: Completed M&A
Completed M&A • Volumes grew 84% with EBIT growing 120% Kiwi Pipe Daily Revenue Kiwi Pipe & Fittings • Leveraging regional footprint to grow outside of Auckland • Group product range now offered to all Kiwi customers with growth across relevant categories Oct-22 Oct-23 Apr-23 Apr-24 Jul-22 Jul-23 Ju
Slide 46: Glossary of terms
Glossary of terms EBIT: Earnings / (Loss) before the deduction of interest and NPS: Net Promoter Score – assists in measuring customer tax. This is calculated as profit for the period before net satisfaction and loyalty interest costs and tax Normalised EBIT/EBITDA: This means EBIT and EBITDA EBITDA
Slide 47: Disclaimer
Disclaimer • This presentation has been prepared by Steel & Tube Holdings operations and business, and business strategy of STU. Information Limited (“STU”). The information in this presentation is of a general about the future, by its nature, involves inherent risks and nature only. It is not a com