Its dividend was cut from 22.5c last year to 16c, a 29% decline.
Revenue for its year to June declined 1% to $511.4million, earnings before interest and tax (ebit) rose 2% to $31.1million and after tax profit rose 3% to $20million, excluding last year’s $6.3million profit gain from an Auckland property sale.
However, Craigs Investment Partners broker Peter McIntyre said the $20million profit "was well down on initial expectations", with ebit coming in at the bottom of the revised range of between 2.5% to 8%.
"While the headline [$20million] number implies some improvement, we note that the uplift was acquisition-related. Excluding the contribution of Composite Floor Decks alone, underlying net profit after tax was down 10%".
CFDL was acquired for $15.5million last October; pushing up net debt by 33% to $127million; this equates to 37% of net debt to equity.
Steel & Tube’s commentary said it was a "positive result, although below the company’s high expectations", citing "multiple external project delays impacting on revenues and earnings, increasing inventory and working capital and reducing operating cashflow".
Steel & Tube shares were down less than 1% to $2.28 following the announcement.
Steel & Tube chairwoman Susan Paterson said an $80million acquisition programme during the past four years had seen business grow, while costs and working capital requirements increased alongside the expansion.
Steel & Tube chief executive Dave Taylor said investment into the S&T Plastics plant secured several contracts, valued about $27 million, which would run through to early 2018.
However, "teething issues" resulted in higher scrap rates than expected, reducing ebit by $2 million, but scrap rates would reduce "considerably" in the months ahead.
Mr McIntyre said Steel & Tube had cited unprofitable contracts in the reinforcing business, with $1.3 million of costs and provisions, issues with recently acquired S&T plastics, project delays, and intense competition "as all contributing to the disappointing result".
Revenue was again hit by falling global steel prices and strong competitor activity, especially in the distribution business, where lower pricing by competitors had impacted on Steel & Tube’s volumes, Mr McIntyre said. He said the full-year revenue result also included full-year contributions from the acquisitions of MSL, S&T plastics, plus eight months from CFDL.
Forsyth Barr broker Damian Foster said Steel & Tube had materially cut its dividend, down by 29% to 16c.
"While we believe this is appropriate given the level of earnings and gearing, it is inconsistent with the message previously provided by the company," he said.
Mr Foster said offsetting the firmer gross margin was a continued and significant 9.3% gain from year on year operating expenses, which last year were up 15.8%.
"This includes a number of one-off costs associated with the Commerce Commission’s investigation into Steel & Tube’s non-compliant steel mesh, and operating issues within S&T Plastics and reinforcing," he said.
