Steel & Tube Holdings Ltd, the largest distributor of steel and allied products in New Zealand, suffered an 85 percent fall in first-half profit and is signalling only a gradual improvement.
The $3.2 million profit in the six months to December 31 is a decrease of $17.6m on the same period last year. Sales of $190.6m were 30 percent lower than last year due to lower demand and reduced steel prices. An interim dividend of 3.5 cents a share will be paid on March 31.
The company, which is seen as an indicator of the health of the economy, said all sectors of its business deteriorated in volume and profitability.
Steel & Tube shares were down 2.54 percent at $2.69 in afternoon trading.
"They came out with a disappointing result and it rubbed off on stocks that are in a similar sector," said Grant Williamson, director at Hamilton, Hindin, Greene.
"It was never expected to be a good result but they probably missed their target a little bit," he said.
The company said it experienced, as expected, soft trading conditions during the first-half due to the impact of the global financial crisis.
"Commercial construction approval values declined, while residential approvals increased but off a very low base. Manufacturers have continued to battle with the volatile exchange rate but rural communities have been encouraged by escalating prices for dairy products."
Volume stabilised toward the end of the half-year and pricing also steadied.
The company said the strength and sustainability of any pick up in activity was still uncertain as economic conditions showed varying growth rates across trading partners.
Global steel prices were volatile as the industry struggled to balance production with varying demand. The volatile New Zealand dollar created variations in domestic steel prices.
"Overall, there are early signs that conditions may be slowly improving but the key issue is the uncertainty around the extent and timing of the recovery.
"The impact of any recovery is likely to have a limited or minimal effect on the company this financial year. It is expected, however, that the second half of the financial year will produce results ahead of those achieved in the first six months."
The company had a $27.3m positive operating cash flow in the period from negative $8.8m for the same period last year.
The company has been listed on the New Zealand Stock Exchange since 1967. It has 8000 shareholders with OneSteel Ltd of Australia owning 50.30 percent.
