Toughening trading condi tions towards the end of Steel & Tube’s trading year has prompted an earnings downgrade, and earnings before interest and tax (ebit)
may be down by as much as 15%.
Steel & Tube chief executive Dave Taylor said while having earlier indicated the steel manufacturer and distributor had expected a better second-half trading, and was on track to deliver, the final weeks of the year became "challenging".
"We’ve faced multiple construction and infrastructure project challenges, and delays which have been out of our control, coupled with intense competition in the market leading to tighter margins, particularly in the construction sector," Mr Taylor said in a statement.
As a consequence, full-year 2017 ebit was expected to fall short of last year’s by between 10% and 15%, he said.
Last year’s ebit came in at $36.7 million, which included the $6.2 million gain from a property sale.
Mr Taylor said underlying ebit for the year, excluding the property gain, would see an increase between 2.5% and 8% on last year.
This year’s downgrade reflected a similar problem last year, where the company’s second-half trading was more challenging than anticipated.
In May last year Steel & Tube also downgraded its full-year profit expectations by 10%-15%, having been affected by low prices, competition and quality issues over the labelling of its seismic mesh.
Last December, the Commerce Commission announced its plan to prosecute Steel &Tube, along with two other companies, following an investigation into its seismic steel mesh, BusinessDesk reported.
The commission said it would allege the companies misrepresented that their mesh complied with New Zealand standards.
In 2016, the company’s 2016 full-year underlying profit was down 9.3% to $19.4million, which it put down to increased costs including for substandard
products and "intense" rivalry in the local steel market.
The shares dropped 5.3% to $2.49 yesterday morning.
They had gained 11% this year, continuing to recover from the 15-year low of $1.79 reached in June 2016 after the Commerce Commission began its investigation and the company cut guidance.
— Additional reporting BusinessDesk
