New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<div><div><div><div><ul><li>As expected (given recent guidance), Steel and Tube's (STU) FY24 result was soft.</li><li>Volume and margin stepped lower in 2H24, reflecting underlying demand which STU believes is around GFC levels.</li><li>STU was broadly breakeven in 2H24 after adjusting out one-offs. </li></ul></div></div></div></div>

As expected (given recent guidance), Steel and Tube's (STU) FY24 result was soft.Volume and margin stepped lower in 2H24, reflecting underlying demand which STU believes is around GFC levels.STU was broadly breakeven in 2H24 after adjusting out one-offs. 

Steel & Tube Holdings - FY24 Result — Second Half Blues

<ul><li>Steel and Tube (STU) FY24 guidance highlighted continued degradation of the NZ operating environment over the second half of the year.</li><li>STU believes steel demand is now below GFC levels, but near-term forward indicators remain weak and the timing of an eventual recovery remains uncertain.</li><li>STU is well positioned for both a continuation of soft activity as well as any rebound in demand, with further cost-out initiatives, inventory now largely normalised, and net cash on its balance sheet. </li></ul>

Steel and Tube (STU) FY24 guidance highlighted continued degradation of the NZ operating environment over the second half of the year.STU believes steel demand is now below GFC levels, but near-term forward indicators remain weak and the timing of an eventual recovery remains uncertain.STU is well positioned for both a continuation of soft activity as well as any rebound in demand, with further cost-out initiatives, inventory now largely normalised, and net cash on its balance sheet. 

Steel & Tube Holdings - It's Tough Out There

<ul><li>We have reviewed our Steel and Tube (STU) earnings forecasts after the recent softer tone to a number of business surveys and our own channel checks that have highlighted stable but not yet improving NZ activity after some green shoots over the first few months of the year.</li><li>While this has resulted in cuts to our near-term estimates, we still expect a pick-up in activity over FY25.</li><li>STU is well positioned for both a continuation of soft activity as well as any rebound in demand, with cost out initiatives progressing well, inventory now largely normalised, and net cash on its balance sheet. </li></ul>

We have reviewed our Steel and Tube (STU) earnings forecasts after the recent softer tone to a number of business surveys and our own channel checks that have highlighted stable but not yet improving NZ activity after some green shoots over the first few months of the year.While this has resulted in cuts to our near-term estimates, we still expect a pick-up in activity over FY25.STU is well positioned for both a continuation of soft activity as well as any rebound in demand, with cost out initiatives progressing well, inventory now largely normalised, and net cash on its balance sheet. 

Steel & Tube Holdings - Recasting Our Estimates

<ul><li>As expected, Steel and Tube's (STU) 1H24 result was soft with lower volumes partially offset by better margins and cost control.</li><li>Sequentially, EBIT was largely flat vs. 2H23, which is a solid outcome given headline volumes were down a further -5% (-10% on a tonnes per day basis). </li><li>Cost out initiatives have progressed well, inventory has now largely normalised, and with net cash on its balance sheet STU is well positioned for both a continuation of soft activity as well as any rebound in demand. </li></ul>

As expected, Steel and Tube's (STU) 1H24 result was soft with lower volumes partially offset by better margins and cost control.Sequentially, EBIT was largely flat vs. 2H23, which is a solid outcome given headline volumes were down a further -5% (-10% on a tonnes per day basis). Cost out initiatives have progressed well, inventory has now largely normalised, and with net cash on its balance sheet STU is well positioned for both a continuation of soft activity as well as any rebound in demand. 

Steel & Tube Holdings - 1H24 Result — Solid Foundations

Thematic (Sector/Industry)

<div id="m_8317410814445020341iubdj-2-2-2"><ul><li>December quarter ready-mix concrete (RMC) production continued the downward trend that began early in 2022.</li><li>Volumes in 2023 were down -11% on the prior year and -12% for the December quarter.</li><li>December volumes were broadly in line with pre-pandemic levels in Auckland, with declines more pronounced across the rest of the country. </li></ul></div>

December quarter ready-mix concrete (RMC) production continued the downward trend that began early in 2022.Volumes in 2023 were down -11% on the prior year and -12% for the December quarter.December volumes were broadly in line with pre-pandemic levels in Auckland, with declines more pronounced across the rest of the country. 

Building Sector - Ready-Mix Concrete — Cementing 2023

New Zealand

Steel & Tube Holdings Limited produces and distributes steel throughout New Zealand and its products include steel fasteners, nuts, bolts and screws.  The Company's other activities include steel reinforcing.

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Steel & Tube Holdings (STU NZ)

Steel & Tube Holdings - FY24 Result — Second Half Blues

Volume and margin stepped lower in 2H24, reflecting underlying demand which STU believes is around GFC levels. STU was broadly breakeven in 2H24...

Forsyth Barr

Steel & Tube Holdings - It's Tough Out There

While STU is trading on an elevated PE, we believe this is fair given earnings are at, or close to, the cyclical trough. NEUTRAL.

Forsyth Barr

Steel & Tube Holdings - Recasting Our Estimates

On our revised estimates, STU trades on a 10.5x one year forward PE, which is in-line with its long-run average. NEUTRAL.

Forsyth Barr

Steel & Tube Holdings - 1H24 Result — Solid Foundations

Sequentially, EBIT was largely flat vs. 2H23, which is a solid outcome given headline volumes were down a further -5% (-10% on a tonnes per day...

Forsyth Barr

Building Sector - Ready-Mix Concrete — Cementing 2023

December volumes were broadly in line with pre-pandemic levels in Auckland, with declines more pronounced across the rest of the country.

Forsyth Barr

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