Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — FY2023 Earnings Presentation
34 slides from Steel & Tube's earnings presentation, Aug 21, 2023
Slide 1: FY23 Results Presentation
FY23 Results Presentation For the 12 months ended 30 June 2023 21 August 2023
Slide 2: Agenda
Agenda • FY23 performance • Financial results • Moving forward • Outlook • Discussion 2
Slide 3: FY23 trading conditions
FY23 trading conditions Resilient business platform and track record of navigating changes through economic cycles • Some easing in activity across most sectors in • Tight labour supply over most of the year, with 2H23; FY23 volumes down 12.4% compared to some easing in 2H23 as more foreign workers
Slide 4: Demand for steel remains solid despite economic conditions
Demand for steel remains solid despite economic conditions Positive long term macro trends will drive momentum Residential Consents Performance of Manufacturing Index (PMI) Share of Sales Long term demand and undersupply Headwinds affecting activity, long term remains positive 4% 4% 60 8 60 7% No. C
Slide 5: Actively managing market challenges
Actively managing market challenges Market Challenges FY23 response Slowing economy • Resilient business platform – significant reductions in debt and inventory, solid underlying cashflows Commodity price • Continued investment in the right inventory and reduced inventory cover volatility, some easi
Slide 6: Results at a glance
Results at a glance • Solid financial performance, at top of Successful strategy execution driving resilient performance guidance • Achieved Steel & Tube’s second highest revenue Revenue Volume Normalised EBITDA result, just shy of last EBITDA year’s exceptional super $589.1m 146,409t $51.9m -1.7% -
Slide 7: Making life easier for customers needing steel solutions
Making life easier for customers needing steel solutions Dual pathway strategy Our goals Strategic pathways Customer - preferred supplier • Best-in-class customer experience for steel solutions and products Continue to • Cross sell products and services Growth - increase value strengthen • Accelerat
Slide 8: Strengthening the core
Strengthening Overall goal to deliver gross margin the core improvement • Best-in-class customer experience • Continuous focus on the customer – customer segmentation to • Cross sell products and services ensure each is serviced in the most appropriate manner • Pricing analytics driving value, consi
Slide 9: Project Strong – focus on palletised operations
Project Strong – focus on palletised operations Goals – increase capacity, improve service offer and productivity • Increased warehouse capacity for • Increased automation and high value, high demand warehouse technologies to drive products along with reductions in safety and productivity – freight
Slide 10: Grow high value products, services and sectors
Grow high value products, services Overall goal to deliver gross margin dollar improvement and sectors • High value products, range Growth initiatives as % of • Recent initiatives now Distribution Revenue extensions, diversified materials account for 10% of and value-added services Distribution EBIT
Slide 11: Recent organic growth initiatives
Recent organic growth initiatives Plate Processing Average Daily Plate Processing • Additional new high specification Plate Processing Revenue & Press Brake installed on budget and on time 30 • Plate processing revenues up 76% and Gross 25 Margin $ up 75% year on year 20 15 • Earnings momentum build
Slide 12: Completed M&A
Completed M&A Kiwi Pipe Average Daily Kiwi Pipe & Fittings • Integration in line with expectations with Revenue business operating on Steel & Tube systems 50 • Solid forward project work in the pipeline 40 30 • Leveraging our existing network to expand the 20 Kiwi range nationally 10 • Earnings per
Slide 13: 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. A total of 17 companies have been reviewed with 8 currently under active consideration Non-binding Opportunities Initial proposal Due diligence Binding offer
Slide 14: Customer, employee and sustainability update
Customer, employee and sustainability update Customer Customer Satisfaction (NPS2) Employee Safety Measure Industry Average: 32 (eTRIFR1) • Satisfaction remains at high levels as we 6 maintain focus on best-in-class customer 50 40 42 4.9 40 34 experience and solutions 30 24 4 1.86 • Growing online p
Slide 15: Financial Results
Financial Results 15
Slide 16: Delivered strong FY23 results
Delivered strong $m FY23 FY22 Var% FY23 results Revenue 589.1 599.1 (1.7%) Group financial summary Volume (Ktonnes) 146.4 167.2 (12.4%) • Volumes have held up well, given super cycle in EBITDA 51.9 66.6 (22.1%) FY22 and New Zealand entering a recession in FY23 Normalised EBITDA* 52.9 66.9 (20.9%) •
Slide 17: Repositioned the business for more challenging economic cycle while investing in growth
Repositioned the business for $m FY23 FY22 more challenging economic Trade and other receivables 79.3 103.3 cycle while investing in growth Inventories 139.2 192.5 Trade and other payables (69.4) (89.0) Group balance sheet summary Working Capital 149.1 206.8 • Significant reduction in inventory Tota
Slide 18: Resilient revenue
Resilient revenue Sales & Volume 700 200 Momentum driven by strong focus on our 600 150 Tonnage (000s) 500 customers, pricing disciplines and growth of Sales ($m) 400 100 high value products, services and sectors 300 200 50 100 Revenue $589.1m: lower by $10m (1.7%) - - Continuing sales momentum, des
Slide 19: Improvement in Gross Margin $/tonne
Improvement in Gross Gross Margin $/tonne 12 Month Rolling Average Margin $/tonne 850 900 799 Year-on-year growth in gross margin $/tonne 700 621 581 • Strategic focus on higher value products, services and sectors 500 • During early calendar 2023 margins contracted as selling Jun-20 Jun-21 Jun-22 J
Slide 20: Business performance
Business performance Resilient performance in a softening market Distribution – high volume business Distribution FY23 FY22 • Solid performance despite market conditions % of Group revenue 60.5% 64.0% • Benefiting from inventory management, pricing and supply chain disciplines Revenue ($m) $356.3 $3
Slide 21: Normalised operating expenses
Normalised operating expenses Targeting $5m of operating expense savings in FY24 • Ongoing focus on streamlining operational costs Normalised Operating • Continued efficiencies have resulted in network Expenses leverage and led to a reduction in carbon emissions 100 30% • Increase in FY23 normalised
Slide 22: Normalised EBIT
Normalised EBIT Pricing benefits offset by inflationary pressures • Normalised EBIT at top of guidance • Focus on higher value products, ensuring inventory availability • Improved pricing disciplines, leveraging analytics and digital capabilities • FY23 Normalised EBIT $32.1m; reported EBIT $31.0m 2
Slide 23: Supply Chain Improvements
Inventory management Managing inventory levels carefully to ensure best use of working capital Inventory Position FY22 to FY23 240 8.9 • Inventory levels increased in FY22 in response to 220 19.5 supply chain congestion 192.5 $ in Stock Inc GIT (m) 200 • FY23 inventory positions significantly reduce
Slide 24: Cashflow
Cashflow • Record operating cash inflows reflecting steady revenues • Decreased inventory on hand as a result of careful inventory management and supply chain normalisation • Dividends of $19m paid during FY23 24
Slide 25: Capital expenditure
Capital expenditure Careful management of funds in current environment • FY23 capex of $6.2m (FY22: $6.2m) Capital Expenditure • Capital spend below depreciation levels 10 10 • Priority capital allocation to business improvement / 8 8 growth projects (63%) and supporting digital (37%) 6 6 $m Planned
Slide 26: Investor returns
Investor returns • Return on funds employed above cost of capital for both FY22 and FY23 • Recessionary environment during 2H23 • High dividend yield maintained FY23 FY22 Interim Dividend cps (net) 4.0 5.5 Final Dividend cps (net) 4.0 7.5 cps (net) 8.0 13.0 Total cps (gross)1 11.1 14.5 Dividend Yiel
Slide 27: Moving Forward
Moving Forward 27
Slide 28: Macro opportunities
Macro opportunities Significant exposure to climate resilience, infrastructure and essential water services Climate resilience Infrastructure Steel is one of the world’s • Proven capability, capacity, and • Govt budget in excess of $71b vs most essential and sustainable expertise to deliver innovati
Slide 29: Economic drivers
Economic drivers Build share of sales in growth sectors FY24 FY27 Share of Sales (FY23) 4% Resellers Demand primarily driven by residential market trends 7% 10% Strong long term pipeline driven by climate investments, rebuild following Others Infrastructure weather events, and catch up on low invest
Slide 30: FY24 outlook
FY24 outlook Market outlook • Economic cycle likely to remain challenging; Well positioned to respond to the challenging recessionary environment to continue 1H24, as economic cycle and to take advantage of new well as usual slowdown in activity prior to election. market and product opportunities, i
Slide 31: Discussion
Discussion
Slide 32: Non-GAAP financial information
Non-GAAP financial information Year ended 30 June EBITDA EBIT $000s FY23 FY22 FY23 FY22 Reported 51,876 66,598 31,009 47,636 Loss on de-recognition of finance lease receivable 128 - 128 - Holiday pay provision release - (854) - (854) NZ IFRS 16 reversal of impairment (177) (527) (177) (527) Software
Slide 33: 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 34: 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