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Steel & Tube reports strong consecutive half year uplift

Steel News - Published on Tue, 19 Feb 2019

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Steel & Tube Holdings Limited has reported a result in line with expectations, with a substantial improvement over the preceding six-month period (2H18) following the capital restructure and as benefits from business transformation initiatives are realised. The company has reaffirmed its FY19 guidance of USD 25 million in earnings before interest and tax. For the six months to 31 December 2018, Steel & Tube reported revenue of USD 258.2 million, EBIT of USD 9.8 million and a net profit after tax (NPAT) of USD 5.6 million.

Excluding S&T Plastics, which the company announced it was exiting in 2H18, and non-trading adjustments. Normalised EBIT of USD 9.7 million was up 116% on 2H18 Normalised EBIT of USD 4.5 million, reflecting the positive turnaround in ongoing business performance. As expected, Normalised EBIT was USD 3.7 million lower compared to 1H18 (USD 13.4 million) as the business continues its recovery from trading issues caused by the new ERP system implementation which went live in October 2017.

The execution of business transformation initiatives is having a positive impact. Sales and volumes have continued the upwards trajectory seen in the last twelve months, on the back of a strong focus on customer needs, improved product availability and delivery performance. The market remains very competitive, keeping pressure on gross margins which have also been dampened by a shift in sales mix in some businesses.

A focus on cost management has seen a pleasing reduction in a number of areas and, excluding S&T Plastics, has led to a 3% decrease in operating expenses as a function of sales compared to 2H18. The cost savings achieved have enabled the business to absorb inflationary and wage and salary cost increases and execute transformation initiatives whilst supporting increasing sales activities, without increasing overall operating expenditure.

The half year period also included further work to leverage value from the investment into the ERP IT platform, the capital restructure, additional organisational restructuring and strengthening of the Leadership Team.

For the six months to 31 December 2018 (1H19)

H1 of 2019 Result Summary

1. H1 of 2019 EBIT in line with previous earnings guidance of ~40% of full year earnings target

2. Significant improvement over the preceding six-month period (2H18) primarily driven by increased sales and reduced operating expenditure

3. Reflects building momentum with benefits from Project Strive business transformation initiatives being realised

4. Profit up 47% on comparative first half year (1H18) to USD 5.6 million and a significant improvement on 2H18 which included non-trading costs and impairments

5. Net debt reduced significantly to USD 16.0 million due to capital raise, improved operating cashflows, tighter working capital management and prudent capital expenditure

6. Solid improvement in operating cashflows to USD 11.l million enabling a return to dividend payments with Board declaring an interim dividend of 3.5 cents per share

7. Company has reaffirmed FY19 EBIT guidance of USD 25 million

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Posted By : Rabi Wangkhem on Tue, 19 Feb 2019
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