New Zealand Professional Investment Services Firm

Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Steel and Tube (STU) Robust FY21 underpinned by cost out, balance sheet strength provides room for capital management</h2>
There was no surprises in the Steel and Tube (STU) FY21 result with normalised EBIT of NZ$19m towards the top end of guidance provided at the end of July. The result was underpinned by a strong rebound in revenue, stable gross margins despite rising steel input prices, and significant reduction in operating costs. At the NPAT level the result was ahead of our expectations due to lower tax.
While no FY22 guidance was provided STU expects a positive medium term market backdrop with a strong for longer cycle supported by residential demand, improving commercial and infrastructure investment (similar to Fletcher Building), and an expanding manufacturing sector. Furthermore, STU’s balance continues to hold historically high levels of cash (NZ$25m or 15cps) and the company is investigating potential capital management activities.
The current NZ lockdowns were not specifically mentioned but the length and severity of restrictions in NZ will likely be a key swing factor in FY22 outcomes. Under NZ’s Level 4 restrictions construction activity is halted. Construction activity can resume at Alert Level 3 but with distancing restrictions that reduce activity levels.
Result analysis
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Source: Company reports, Forsyth Barr analysis

Steel and Tube (STU) Robust FY21 underpinned by cost out, balance sheet strength provides room for capital management
There was no surprises in the Steel and Tube (STU) FY21 result with normalised EBIT of NZ$19m towards the top end of guidance provided at the end of July. The result was underpinned by a strong rebound in revenue, stable gross margins despite rising steel input prices, and significant reduction in operating costs. At the NPAT level the result was ahead of our expectations due to lower tax.
While no FY22 guidance was provided STU expects a positive medium term market backdrop with a strong for longer cycle supported by residential demand, improving commercial and infrastructure investment (similar to Fletcher Building), and an expanding manufacturing sector. Furthermore, STU’s balance continues to hold historically high levels of cash (NZ$25m or 15cps) and the company is investigating potential capital management activities.
The current NZ lockdowns were not specifically mentioned but the length and severity of restrictions in NZ will likely be a key swing factor in FY22 outcomes. Under NZ’s Level 4 restrictions construction activity is halted. Construction activity can resume at Alert Level 3 but with distancing restrictions that reduce activity levels.
Result analysis

Source: Company reports, Forsyth Barr analysis

Steel and Tube (STU.NZ): FY21 First Impressions

Steel & Tube Holdings

Steel and Tube (STU.NZ): FY21 First Impressions