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Steel & Tube profit down in tough market

NZ NewswireNZ Newswire 11/08/2016 Jonathan Underhill

Steel & Tube Holdings, whose shares have recovered from a 15-year low in the past two months, posted a 9.3 per cent decline in full-year underlying profit as dealt with substandard products and intense rivalry in the local steel market.

Underlying profit was $19.4 million in the year ended June 30, from $21.4m a year earlier, the Wellington-based company said in a statement.

Sales rose 3 per cent to a record $516m but the gain was swallowed up by selling and administration expenses and a one-off cost impact in the second half related to product quality issues.

The steel products distributor is clawing back from a horror year, which saw its shares sink as low as $1.79 in June, the lowest since 2001.

In March, the Commerce Commission began an investigation into earthquake reinforcing mesh products that weren't certified as claimed.

It was forced to cut guidance in May as intense competition in the domestic steel market squeezed margins and its Chinese-sourced road reinforcing for the Huntly bypass was found to be weaker than specified.

In the event, full-year underlying earnings exceeded its May guidance.

"Despite the headwinds we've experienced and particularly in the second half of the year, our results demonstrate our resilience and ability to continue delivering sustainable value," said chief executive Dave Taylor.

Net profit rose about 21 per cent to $25.8m, helped by a $6.4m gain on the sale of Steel & Tube's Bowden Road property in Auckland.

The company will pay a final dividend of 13.5 cents, up from 10 cents a year earlier, lifting total payments for the year to 22.5 cents from 19 cents.

Mr Taylor said it was a challenging global steel environment but steel prices were firming both domestically and globally.

"We are optimistic that we'll see a stronger performance from the business in our next trading year," he said.

The shares last traded at $2.07.

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