Steel & Tube Holdings Limited · NZX:STU
Steel & Tube — H1 2017 Earnings Presentation
27 slides from Steel & Tube's earnings presentation, February 2017
Slide 1: 2016 Annual Update
2016 annual Update Dave Taylor, CEO 2016 Annual Janie Elrick, CFO August 2016 update Dave Taylor, CEO Janie Elrick, CFO August 2016 1
Slide 2: Disclaimer
Disclaimer This presentation, February 2017, provides additional comment on Steel & Tube’s financial results announcement for the period ending 31 December 2016. It should be read in conjunction with the documents attached to that announcement, which highlight future outlook expectations of earnings
Slide 3: Financial Highlights – H1 ending December 2016
Financial Highlights – H1 ending December 2016 Revenue: $254m – down $11m or 4% Profit before Tax: Underlying $14.6 m – up $ 0.5m or 4% EBIT Underlying: $16.1m – up $0.3m or 2% Net operating cash flow: $14.0m – up $4.7m or 50% Net tangible assets / share: $1.49c – down $0.10 Net debt: $1
Slide 4: Overview H1 2017: Improving performance in variable markets
Overview H1 2017 Improving performance in variable markets • Global steel prices firming, following significant increases to key input costs; iron Global ore, coking coal and international freight. Volatility expected to continue • Excess capacity in both raw materials and finished steel remains wit
Slide 5: Overview H1 2017: Operating performance
Overview H1 2017 Operating performance Quarter 1 • Despite global pricing increasing, NZ pricing proving difficult to shift up • Inconsistent behaviour from competitors Price • Reinforcing prices at multi-year lows despite construction activity Increase • S&T’s focus on pricing and margins saw margi
Slide 6: Overview H1 2017: Continued rejuvenation
Overview H1 2017 Continued rejuvenation • Leverage capabilities across all parts of S&T Building • Ongoing L&D investment Capability • Bench strength continues to improve Facility • New Dunedin facility to open February 2017 • Christchurch Distribution facility re-development $10m, early 2018 upgrad
Slide 7: Overview H1 2017: Acquisitions
Overview H1 2017 Acquisitions • Continues to outperform acquisition expectations S&T • Comflor business reflects growth in construction activity Stainless • Stainless & Engineering steels consistent with overall market • Pilot for ERP, insight and learnings for the remainder of the Group • Continues
Slide 8: Overview H1 2017: Product conformance
Overview H1 2017 Product conformance Commerce • CC investigation, 3 companies to be prosecuted and 2 others issued warning • CC intends to prosecute S&T for the inadvertent use of a testing laboratory logo, Commission and for S&T application of the testing methodologies under the standard & SE 62 •
Slide 9: New Zealand Markets
New Zealand Markets Diversification across sectors, significant presence in buoyant construction sector Source: S& T Research 9
Slide 10: Strong performance, despite falling steel prices
Strong performance, despite falling steel prices • Falling steel prices since 2011, have been offset by improved business performance • Steel prices have started to recover paving the way towards improved results in the medium term Source: SBB & S&T Financial reports 10
Slide 11: Business Performance
Business Performance In-line with previous guidance * 11 Source: S&T financial reports * Sale of Bowden Rd $6.2m
Slide 12: Business Performance: Cost management
Business Performance Cost management One-off 12
Slide 13: Business Performance; EBIT comparison
Business Performance; EBIT comparison Price impacting base business, acquisitions performing well 13
Slide 14: Balance Sheet
Balance Sheet Liquid assets, gearing sound 14
Slide 15: Business Performance: Operating cash remains strong
Business Performance Operating cash remains strong 15 Source: S&T financial reports
Slide 16: Outlook: Improved earnings expected – second half
Outlook Improved earnings expected – second half Significant factors • Price increase expected across most product Global Pricing categories February 2017 onwards • Plant prepared to deliver new contracts S&T Plastics • $27m: $8m in H2 2017 • Legal & one-off costs $1.9m Costs and • $2.8m annualised
Slide 17: Outlook: Further out
Outlook Further out Significant factors • Pricing volatility likely to continue for both raw materials and finished steel Global Steel • Excess capacity likely to remain despite Environment Chinese efforts to reduce • Anti-dumping actions to remain • NZ demand to remain around 860 tonnes Domestic ma
Slide 18: Outlook: Improving performance
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 19: Thank you
2016 annual Update Dave Taylor, CEO Janie Elrick, CFO August 2016 Thank you 19
Slide 20: Global Markets: Steel production
Global Markets Steel production • Global steel output has dropped by 0.8% during 2016 compared to PCP led by China which dropped 1.2% • China has shed 45 MT of capacity in 2016 and plan to do more this year • Indian steel production however grew and is third after Japan • Domestic demand for steel i
Slide 21: Global Markets: Steel and raw material price movement
Global Markets Steel and raw material price movement • Iron ore prices increased to USD 80/ te in spite of increased capacity in Australia and Brazil. Uneconomic mines closed in China contributed • Coking coal price spike has eased due to Chinese working days restriction relaxed • Finished steel pri
Slide 22: Global Markets: Stainless steel prices and production
Global Markets Stainless steel prices and production • Production declined marginally in 2015 and current trends indicate a drop in 2016 • China is the leading producer and is following the global trend • Demand forecast is positive despite the current downtrend • Prices correlate closely with nicke
Slide 23: Global Markets: Exchange rates
Global Markets Exchange rates • The NZD has appreciated in recent months against key currencies • Remains elevated against the AUD 23 Source: ANZ Bank
Slide 24: New Zealand Markets: Material volumes
New Zealand Markets Material volumes • Total steel demand is marginally down year on year. • Construction activity supports steel demand • Stainless steel demand is recovering due to viticulture and improved dairy prices • Fastenings market growing and less vulnerable to volatility Source: Stats NZ;
Slide 25: New Zealand Markets: Key sector trends – building consents
New Zealand Markets Key sector trends – building consents • Non Residential building consent by floor area reduced 20% in 2016 • Canterbury reduced by 34%, Auckland by 24% and all other regions by 9% • Conversely, consents by $ value shows a growth of 4% nationally • Residential consent by floor are
Slide 26: New Zealand Markets: Key sector trends – rural
New Zealand Markets Key sector trends – rural • With international dairy prices firming to 2½ year high, forecast pay-out increased to $6.55/kgms • The improvement in prices has been attributed to increased buying demand, particularly China • The increased pay-out is likely to be above the direct co
Slide 27: New Zealand Markets: Key sector trends – manufacturing
New Zealand Markets Key sector trends – manufacturing ($m) • Output continues to firm • Solid growth from non food and non petroleum sectors • Equipment and machinery manufacturers nearing pre GFC levels • Metal producers growing at a slower pace • Export markets for manufactured goods remain resili
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