Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — H1 FY2023 Earnings Presentation
29 slides from Steel & Tube's earnings presentation, 2023
Slide 1: HY23 Results Presentation
HY23 Results Presentation For the six months ended 31 December 2022
Slide 2: Half year in review
Half year in review • Solid demand for steel despite easing in activity across most sectors, infrastructure continues to strengthen; 1H23 volumes decreased slightly although still ahead of 1H five-year average • Supply chain constraints easing and international freight costs reducing towards end of
Slide 3: Strong trading performance and resilient 1H23 results
Strong trading performance and resilient 1H23 results Record revenue paired with strong earnings Normalised • Customer demand Revenue Volume EBITDA driving revenue EBITDA $315.3m 80,491t $30.5m -2.8% $31.6m -4.4% • Year-on-year uplift in +11.7% -0.6% gross margin dollars Normalised • Costs tightly m
Slide 4: Current market challenges and how we respond to them
Current market challenges and how we respond to them Market Challenges OUR RESPONSES FY23 Commodity price • Continued investment in the right inventory volatility, some easing • Easing supply chain allowing reduced inventory cover • Selling down lower margin inventory • Focus on margin capture on ex
Slide 5: Steel Pricing and Procurement
Steel Pricing and Procurement • Global demand moving to more normal growth trajectory: global demand for steel, particularly in China, has cooled, however is expected to return to a more normal growth trajectory as China relaxes Covid restrictions and invests in economic stimulus • Peak prices have
Slide 6: Demand for steel continues despite challenging macro trends
Demand for steel continues despite challenging macro trends Economic headwinds expected to lead to some moderation in activity in late FY23 Share of Sales Residential Consents Performance of Manufacturing Index (PMI) No. Consents (000’s) 100% 50 8 4% 6% 5% SQM (000s) 60 90% 11% 10% 40 7 80% Others 4
Slide 7: Significant value from 'strengthen and grow' strategies
Significant value from ’strengthen and grow’ strategies • Clear strategic focus on continuing to strengthen the core and investing in high value products, services and sectors for growth • Recent growth investment into new products and services – fasteners, aluminium, plate processing, fire and wate
Slide 8: Building a sustainable business
Continuing strength in key Building a metrics sustainable Customer Satisfaction business NPS 40 (1H22: 38) Employee Safety Measure Long term business sustainability supported by eTRIFR 1.10 (1H22: 1.27) balance sheet strength through the economic cycle Employee Engagement with capacity for growth in
Slide 9: Delivered strong 1H23 results
Delivered strong $m 1H23 1H22 Var% 1H23 results Revenue 315.3 282.2 11.7% Volume (Ktonnes) 80.5 82.8 (2.8%) Group financial summary EBITDA 30.5 31.9 (4.4%) • Inventory reducing as supply chain headwinds ease; inventory turns remained consistent Normalised EBITDA* 31.6 31.8 (0.6%) • Effective margin
Slide 10: Repositioned the business for more challenging economic cycle while investing in growth
Repositioned the business for $m 1H23 FY22 1H22 more challenging economic Trade and other receivables Inventories 78.9 175.0 103.3 192.5 89.6 152.9 cycle while investing in growth Trade and other payables (62.9) (89.0) (85.8) Working Capital 191.0 206.8 156.8 Group Balance Sheet Summary • Reduction
Slide 11: Record revenue
Record revenue Sales & Volume Momentum driven by strong focus on our 400 100 customers, trading disciplines and positive 300 75 Tonnage (000’s) market conditions 200 50 Sales ($m) 100 25 Revenue $315.3m: Up $33.1m, +11.7% 0 0 1H21 1H22 1H23 Continuing sales momentum, despite market conditions Sales
Slide 12: Improvement in Gross Margin $/tonne
Improvement in Gross Margin $/tonne Gross Margin $/tonne Year-on-year growth in Gross Margin $/tonne $850 • Some margin reduction as excess inventory was $778 reduced $623 • Focus on fast moving inventory ensures minimal margin squeeze as prices eased • Increased input costs – operating expenses hel
Slide 13: Business Performance
Business Performance Increases across both divisions Distribution – high volume business Distribution 1H23 1H22 • Solid performance despite market conditions % of Group 60.8% 64.4% • Benefiting from inventory management, pricing and revenue supply chain disciplines Revenue $191.6m $181.7m • Expect m
Slide 14: Normalised operating expenses
Normalised operating expenses Ongoing focus on operating expenditure • Normalised operational costs as a percentage of sales Normalised Opex continues to decline 60 20% • Continued efficiencies have resulted in network 42.9 47.2 leverage and led to a reduction in carbon emissions 40 38.2 $m 15% Incr
Slide 15: Pricing benefits offset by inflationary pressures
Pricing benefits offset by inflationary pressures • Focus on higher value products, ensuring inventory availability for key clients • Improved pricing disciplines, leveraging digital capabilities and analytics • 1H23 Normalised EBIT $21.5m; reported EBIT $20.3m 1H22 Normalised EBIT Volume Pricing Mi
Slide 16: Supply Chain Improvements
Inventory management Managing inventory levels carefully to ensure best use of working capital • Inventory levels increased in FY22 in response to supply chain issues and to ensure product availability for key customers • Higher inventory positions now being reduced - 25% reduction in volumes (tonne
Slide 17: Cashflow
1H23 Cashflow increased revenues supply constrains ease • Strong cash inflows reflecting • Dividends of $12.5m paid during • Decrease in inventory on hand as Opening Net Debt EBITDA Decrease in Inventory Acquisition payment Other working capital movement/timing Dividend payments Capex payments Lease
Slide 18: Capital Expenditure
Capital Expenditure Careful management of funds in current environment • 1H23 capex of $2.3m (1H22: $2.6m) Capital Expenditure 10 10 • Capital spend reduced below depreciation levels 8 • Priority capital allocation to projects supporting 8 digital (43%) and business improvement/growth 6 6 $m (57%) 4
Slide 19: Moving Forward
Moving Forward 19
Slide 20: Strategic focus
Strategic focus Growth focused on strengthening the core and building higher value products, services and sectors to drive gross margin improvement – benefits expected from FY24 onwards OUR PURPOSE: To make life easier for our customers needing steel solutions 20
Slide 21: High value products, strengthen the core
Strategic pathway: current state Strategic Initiative Early Hitting Full stage its stride benefit strengthen the core Continue to build best-in-class customer experience ✓ Continue to Leverage opportunities to cross sell a wide range of products and services ✓ Drive gross margin $/tonne through dyna
Slide 22: New growth investment: Aluminium offering
New growth investment Aluminium offering • Steel & Tube has entered the aluminium market in a selected range of high demand products largely servicing existing customers • Focus on high value products • Aligned to Steel & Tube’s capabilities and completes our steel and metals offer to customers • Di
Slide 23: Recent growth initiatives: Reporting back
Recent growth initiatives: Reporting back STRENGTHENING THE CORE PROGRAMMATIC M&A Plate Processing Kiwi Pipe & Fittings Fasteners NZ • New high specification Plate • Integration in line with expectations • Continued growth in customers and Processing & Press Brake installed with business operating o
Slide 24: 2H23 Market Outlook
2H23 Market Outlook Challenging macro trends expected to continue; following prolonged ‘super cycle’, steel demand is now expected to moderate Trading conditions: • Challenging macro trends expected to continue – inflation and higher interest rates, tight labour market and the ongoing impact from Co
Slide 25: 2H23 Business Outlook
2H23 Business Outlook Steel & Tube is well positioned to respond to the changing environment and to take advantage of new market and product opportunities Business Outlook: • Wet weather has impacted demand in January and February, particularly in construction and infrastructure • We remain focussed
Slide 26: Discussion
Discussion
Slide 27: Non-GAAP Financial
Non-GAAP Financial Period ended 31 December EBITDA EBIT $000s 1H23 1H22 1H23 1H22 Reported 30,482 31,935 20,344 22,636 Loss on de-recognition of finance lease receivable 181 - 181 - IFRS 16 impairment reversal (113) (374) (113) (374) Release of holiday pay provision - (854) - (854) Software as a Ser
Slide 28: 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 year before net satisfaction and loyalty interest costs and tax Normalised EBIT/EBITDA: This means EBIT and EBITDA EBITDA:
Slide 29: Disclaimer
Disclaimer • This presentation has been prepared by Steel & Tube Holdings about the future, by its nature, involves inherent risks and Limited (“STU”). The information in this presentation is of a general uncertainties. Accordingly, nothing in this presentation is a promise nature only. It is not a
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