Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — FY2022 Earnings Presentation
38 slides from Steel & Tube's earnings presentation, 2022
Slide 1: FY22 Results Presentation
FY22 Results Presentation For the 12 months ended 30 June 2022
Slide 2: FY22 demonstrated Steel & Tube's value
FY22 demonstrated Steel & Tube’s value • Record financial performance • Robust operating model that will deliver through the economic cycle • Clear focus on continuing to strengthen the core and investing in high value products, services and sectors • Goal to deliver sustainable double-digit ROFE 2
Slide 3: Record results with improvement in all key metrics
Record results with improvement in all key metrics Results driven by strong sector demand, trading disciplines, customer service, operational performance and supply chain management Revenue Volume EBITDA EBIT NPAT $599.1m 167,209t $66.6m $47.6m $30.2m +24.6% +5.7% +72.5% +130.0% +96.4% Dividend ROFE
Slide 4: Building a sustainable business
Building a sustainable business Our long term aim is to operate our business in a way that is financially rewarding for our shareholders and Maximising steel’s positive for our people, our customers contribution to a Supporting our and our planet. sustainable and people and low emission customers St
Slide 5: ESG Scorecard
ESG Scorecard Positive outcomes on safety and employee engagement Employee Safety Measure • TRIFR 1.13 – substantially than industry 6 4.9 standards 4 • Emphasis on critical risks and reduction measures TRIFR 1.86 2 1.13 • Safety conversations program and worker 0 engagement providing valuable insig
Slide 6: ESG Scorecard
ESG Scorecard Delivery for customers in challenging period; continued focus on decarbonisation Customer satisfaction 50 40 • NPS of 40 for FY22 40 34 24 • Improving result reflects ability to deliver for NPS SCORE 30 20 customers in challenging period 10 0 FY20 FY21 FY22 Carbon Reduction* 2,300 2,26
Slide 7: Five year transformation
Five year transformation Embedded value from turnaround programme; growth strategy now underway Revenue EBITDA EBIT NPAT 599.1 47.6 30.2 66.6 495.8 $m $m $m $m (28.1) (32.1) (36.2) FY18 FY22 FY18 FY22 FY18 FY22 FY18 FY22 Volume Normalised EBITDA Normalised EBIT ROFE 47.9 66.9 14.6 167 150 $m % Tonne
Slide 8: Positive economic activity driving high demand for steel in FY22
Positive economic activity driving high demand for steel in FY22 Economic headwinds expected to result in some levelling off in activity in late FY23 Share of FY22 Sales Residential Consents Performance of Manufacturing Index (PMI) No. Consents (000’s) 50 8 100% 60 4% 5% SQM (000s) 90% 40 7 10% 40 8
Slide 9: Shareholder Returns
Shareholder Returns 5 year transition complete, now focused on growth and continue to generate Steel & Tube delivers a high dividend yield sustainable double-digit ROFE: • Quality business with strong foundations embedded FY22 Dividend: 13.0 cps Represents a dividend yield of 11.4%* • Leading suppli
Slide 10: FY22 Financial Results
FY22 Financial Results Richard Smyth Chief Financial Officer
Slide 11: Delivered record FY22 results
Delivered record $m FY22 FY21* Var% FY22 results Revenue 599.1 481.0 24.6% Volume (Ktonnes) 167 158 5.7% Group financial summary • Volume and revenue uplift EBITDA 66.6 38.6 72.5% • Gross margin continues to improve Normalised EBITDA** 66.9 37.6 77.9% • Held onto embedded structural reductio
Slide 12: Well positioned to deliver through the economic cycle while investing in growth
Well positioned to deliver $m FY22 FY21 through the economic cycle Trade and other receivables Inventories 103.3 192.5 84.0 113.5 while investing in growth Trade and other payables (89.0) (80.0) Working Capital 206.8 117.5 Group Balance Sheet Summary Total Facility 100.0 50.0 • Utilised strong cash
Slide 13: Strong earnings momentum
Strong earnings momentum Driven by business improvements, trading disciplines and solid activity 90 Covid-19 Impact 80 450 Gross Margin 70 60 Margin, EBIT, EBITDA $m 350 Revenue 50 Revenue $m 40 Normalised EBITDA 250 30 Normalised EBIT 20 150 10 0 50 -10 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 Colum
Slide 14: Record revenue
Record revenue Sales & Volume Momentum driven by a strong focus on the 600 customer, trading disciplines and positive 160 market conditions 120 Tonnage (000’s) 400 Sales ($m) 80 200 Revenue $599.1m: Up $118.1m, +24.6% 40 Continuing sales momentum, despite Covid-19 impact 0 0 FY20 FY21 FY22 Volume 16
Slide 15: Strong uplift in gross margin
Strong uplift in gross margin Priority focus on gross margin $/tonne improvement Consistent Gross Margin 25% Improvement Growth in Gross Margin to 22.3% • Disciplined governance and controls, data driven pricing decisions, 22.3% product mix focused on growing market share in attractive sectors which
Slide 16: Business Performance
Business Performance Increases across both divisions; particularly strong performance in Distribution Distribution – high volume business Distribution FY22 FY21 • Excellent performance, well positioned to take advantage of market conditions % of Group 64.0% 59.6% revenue • Benefiting from inventory
Slide 17: Normalised operating expenses
Normalised operating expenses Ongoing focus on operating expenditure Normalised Opex Completion of Project Strive with significant structural 100 25% changes has delivered long term benefit • $12.3m reduction in normalised opex since FY18 80 20% • Operational costs as a percentage of sales continues
Slide 18: FY22 Normalised EBIT
EBIT driven by volume and improvement margin growth FY21 Normalised EBIT FY21 Lease Gains Volume Growth Margin Growth FY22 Wage Subsidy Net cost escalations FY22 Normalised EBIT 18
Slide 19: Inventory management
Inventory management Inventory management system and focus on availability of critical items has resulted in consistent DIFOT for customers • Utilised strong cash position to invest in critical inventory, supporting our customers and mitigating supply chain headwinds • Higher inventory value as a re
Slide 20: Cashflow
Cashflow • Strong cash inflows reflecting increased revenues • Significant investment in inventory which has increased $79.0m since FY21 • Dividends of $14.5m paid during FY22 • Steel & Tube to start paying Income Tax from FY23 • Extension of existing revolving cash advance facility from $50m to $80
Slide 21: Capital Expenditure
Capital Expenditure Careful management of funds in current environment • FY22 capex of $6.2m (FY21: $5.5m)* Capital Expenditure • Capital spend approximately equal to D&A 10 10 • Priority capital allocation to projects supporting digital 8 8 (30%) and business improvement/growth (70%) 6 6 Planned In
Slide 22: Moving Forward
Moving Forward 22
Slide 23: Our purpose
23 Our purpose To make life easier for our customers needing steel solutions • Providing a one-stop-shop for the most essential steel products – from foundation to roof and everywhere in between • Doing everything we can to make it easy for our customers to do business with us • Always looking for w
Slide 24: Steel procurement and pricing
Steel procurement and pricing Elevated pricing although expected to ease in the medium term • Russia/Ukraine conflict – impacted global steel market and future Ukraine rebuild will absorb large quantities of steel • China, India and US demand for steel expected to increase – fiscal stimulus measures
Slide 25: Steel & Tube is strongly positioned to deliver through the economic cycle
Steel & Tube is strongly positioned to deliver through the economic cycle Sector Outlook Key Strengths • Significant rebuilding of Government • Unmatched breadth of high-quality product and investment in infrastructure (+56% over the solutions next decade compared to last decade, • National network
Slide 26: Current market challenges and how we respond to them
Current market challenges and how we respond to them Market Our Responses Challenges FY22 FY23 Commodity • Careful investment in high demand, high • Continued investment in the right inventory price volatility margin inventory items • Easing supply chain allowing reduced cover • Keeping ahead of the
Slide 27: 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 Grow High Value Products, Continue to Strengthen the Core Services and Sectors • Continue to build best-in-class c
Slide 28: Continue to strengthen the core
Continue to strengthen the core Initiatives underway • Continue to build best-in-class • Customer value proposition and sales optimisation customer experience • Enhanced use of Data and Analytics • Leverage opportunities to cross • A continued focus on Pricing and Procurement to ensure all sell a wi
Slide 29: Digital Advantage
Ecommerce • Revenue +140% yoy Digital Advantage • Customer numbers +200% yoy • 20% of active customers now FY23 strategic initiatives and focus areas using webshop • Continued focus on customer and customer experience Electronic Data Interchange (EDI) • Use of analytics to better serve different cus
Slide 30: Grow High Value Products, Services & Sectors
Grow High Value Products, Services & Sectors Initiatives underway: • Expansion of plate processing capability and offer with • Growth is targeted towards high investment in market leading machinery value products, diversified materials and value-added services • Increasing share of fasteners market
Slide 31: Expanded plate processing capability and offer
Expanded plate processing capability and offer • Attractive value-added products • Growing market sector • Replacement of obsolete equipment with large, high capacity machinery • Market leading – digitally enabled, automated cutting, optimises remnants • Operational from June 2022, solid forward wor
Slide 32: Kiwi Pipe and Fittings
Kiwi Pipe and Fittings • Symbolic of strategy to selectively invest in high value products and segments • Niche strength – fire and water reticulation products • Builds on Steel & Tube’s existing offer • Provides scale, market share growth and immediately earnings accretive 32 32
Slide 33: Strategic pathway: current state
Strategic pathway: current state Strategic Initiative Early Hitting Full stage its stride benefit Continue to build best-in-class customer experience strengthen the core Continue to Leverage opportunities to cross sell a wide range of products and services Drive gross margin $/tonne through dyna
Slide 34: FY23 Outlook
FY23 Outlook Robust operating model, well positioned to deliver through the economic cycle Trading conditions: Business Outlook: • Continuing volatility in global and local • Clear focus on strengthening the core and economies expected investing in high value products, services and • Steel pricing e
Slide 35: Discussion
Discussion
Slide 36: Non-GAAP Financial
Non-GAAP Financial EBITDA EBIT Period ended 30 June Restated Restated $000s FY22 FY21 FY22 FY21 Reported 66,598 38,614 47,636 20,707 Holiday Pay provision release (854) - (854) - NZ IFRS 16 reversal of impairment (527) (1,546) (527) (1,546) Gain on sale of properties (1,215) (1,215) Software as a Se
Slide 37: Glossary of Terms
Glossary of Terms EBIT: Earnings / (Loss) before the deduction of interest and Normalised EBIT/EBITDA: This means EBIT and EBITDA tax. This is calculated as profit for the year before net excluding non-trading adjustments and unusual transactions interest costs and tax eTRIFR: Employee Total Recorda
Slide 38: Disclaimer
Disclaimer • This presentation has been prepared by Steel & Tube Limited about the future, by its nature, involves inherent risks and (“STU”). The information in this presentation is of a general nature uncertainties. Accordingly, nothing in this presentation is a promise only. It is not a complete