Ann: ADDRESS: STU: Steel & Tube Annual Meeting

• Release Date: 14/11/12 14:00
• Summary: ADDRESS: STU: Steel & Tube Annual Meeting
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STU
14/11/2012 12:00
ADDRESS

REL: 1200 HRS Steel & Tube Holdings Limited

ADDRESS: STU: Steel & Tube Annual Meeting

CHAIRMAN'S ADDRESS

Performance

During the year to 30 June 2012 the Company delivered a pleasing performance
in what was another difficult year and perhaps more challenging and complex
than the previous year.

Demand across all key sectors remained subdued, and the momentum of the
expected Christchurch rebuild activity, although improving, continues to
experience delays, restricting steel demand to levels marginally above the
prior year. These factors have led to an intensely competitive trading
environment.

Therefore, it is pleasing that sales increased by five per cent to $405
million.  However, profitability was lower at $13.1 million, a reduction of
23 per cent, primarily due to increased competitiveness within the industry.

Operating cash and the balance sheet remain strong, and a final dividend of
6.5 cents increased the full-year dividend to 12 cents a share.

The Company's commitment to the safety of all of its employees, contractors
and site visitors remains a high priority. Increased health and safety
resources provide greater support for safe, front-line, operations.

The Board is pleased with the leadership under Dave Taylor and his Executive
Management Team.

Reinvigoration

The reinvigoration programme of change has achieved substantial progress.
One Company fully integrates the organisation to ensure our core values and
end-to-end customers' needs are central to all day-to-day behaviours and
outputs.
The One Company approach is becoming embedded within the business and new
areas of focus are underway.  Staff have clearly-defined performance
expectations as well as up-skilling opportunities to meet our
customer-centric focus.  The Company's strengthened brand and culture,
underpinned by the values and the by-line 'stronger in every way', continue
to gain traction both internally and externally.
One Company lays out a strong vision for the future and we are pleased with
how the entire programme is increasingly benefiting both our customers and
the business.

This year has also seen the implementation of the first stages in a major
transformation of the Company's supply-chain function. We have introduced a
nationally-integrated, whole-company approach to our supply chain.  Although
it is early days for the new model, we are encouraged by the progress in what
we are seeing. The goal is to deliver greater cost efficiencies whilst
providing better product accessibility and options for our customers
throughout New Zealand.

Arrium Divestiture

Clearly, a significant development in recent weeks has been the change in
shareholding ownership.

Australian-based Arrium, formally known as OneSteel, sold their 50.3 per cent
majority shareholding in Steel & Tube on October 9th, 2012.

It was becoming increasingly clear that Arrium's future and, therefore their
investments, lay in resources and the mining sector.  Consequently, they have
elected to reduce non-aligned investments.

The Board wishes to acknowledge the leadership, the legacy and the value
Arrium has contributed to Steel & Tube.  Arrium began its association with
our Company in 1985 through its earlier history as Tubemakers of Australia,
then BHP Australia and then OneSteel, which became Arrium earlier this year.
We greatly appreciate the benefits gained from their connection, which have
helped us to evolve into the modern company we are today.  We wish Arrium
well in their future quests.

Arrium remains one of our key suppliers and we look forward to this continued
relationship.

In today's market, we believe the divestment is a positive development and in
the best interests for Steel & Tube.

The majority of the shares on offer were acquired by a range of leading New
Zealand-based institutional investors. The remainder were taken up by
predominantly New Zealand retail investors.

From a strategic perspective, the changes to our share ownership will enable
the Board to have more flexibility in setting our strategic direction.
Overall, I am confident the change in ownership is in the best interests of
all shareholders and coupled with the re-entry to the NZX 50, I believe these
are indeed interesting times for Steel & Tube.

Board of Directors

As a further result of the ownership changes, Dean Pritchard resigned as
Chairman on October 9th, 2012.  However, he continues as a director and I,
along with the other directors, am most grateful to Dean for his decision to
remain on the Board.  Dean has been Chairman for seven years.

I would like to thank him for his leadership, particularly during one of the
most challenging, economic-rollercoaster periods in modern times.  Dean's
extensive industry experience and knowledge about Steel & Tube is invaluable
to us going forward.

As a consequence of Dean's decision to step down as Chairman, the Board
elected me as the new Chairman on October 10th, 2012.  I was elected as an
independent director on the Board last November and it is my privilege to now
hold the position of Chairman.

Steve Hamer, Chief Executive of OneSteel Distribution and an Arrium-appointed
director, stepped down on October 9th, 2012. Steve was appointed as a
non-independent director to the Steel & Tube Board on November 10th, 2011.
Steve has contributed greatly to our Board and I thank him for this.  A
search for a replacement director is currently underway.

Both Dean Pritchard and Rosemary Warnock were Arrium non-independent
appointments to our Board.  They remain as directors and are now considered
independent directors. Their industry knowledge and expertise, combined with
their understanding of and commitment to our Company, are of enormous benefit
to us. I am especially grateful to both Dean and Rosemary for their
decisions to continue.

In line with our constitution, Rosemary Warnock, as well as independent
director, Janine Smith, are due for retirement by rotation.  I am pleased to
affirm both Rosemary and Janine have made themselves available for
re-election, and they are before you today.  This will be addressed later in
the proceedings.

The changes for the Company will create greater interest in Steel & Tube from
the investment community.

Rejoining NZX 50

And, just last week (7 November) the New Zealand Stock Exchange announced
Steel & Tube is to re-enter the NZX 50 as from today.  This is because of the
change of ownership of white-ware company Fisher and Paykel Appliances
Holdings Limited (FPA) and their subsequent de-listing.

Earlier this year, as a result of changes to the way NZX calculated the NZX
50 listing criteria, Steel & Tube lost its NZX 50 status, based in part on
the value of a listed company's market capitalisation, after  discounting
majority shareholdings. Due to Arrium selling its majority shareholding in
Steel & Tube last month, we were once again ranked in the top 50 companies on
the New Zealand Stock Exchange by market capitalisation.

Unsolicited offer to Steel & Tube Shareholders

In recent weeks some of our shareholders will have received an unsolicited
offer to purchase their shares at a discounted price. These offers are
sometimes referred to as 'low ball offers' and have received much attention
on both sides of the Tasman during the last few years.

The company involved on this occasion is Stock and Share Trading Company Ltd
and we understand the offer was to some smaller shareholders with an offer
price of $1.00 per share.

As Chairman, I contacted all Steel & Tube shareholders directly by email or
letter to advise the Board's position in the event an unsolicited purchase
offer was made.  Our advice included a caution to seek independent
professional advice before accepting any offer.  Such offers as this are
often less than could be realised by selling the shares via a share broker on
the NZ Stock Exchange (NZX).  The Board also recommended shareholders compare
the offer being made with the latest traded price of Steel & Tube Holdings
available on the NZX website or in daily newspapers.

Outlook

As we indicated in our results announcement released in August, it remains
difficult to form a clear view of the trading landscape even over the
short-to-medium term.  Sovereign-debt issues in Europe continue.  This in
part is a contributor to the decline in China economic activity, which in
turn is reducing commodity prices in the Australian resources sector.  All of
these factors are inextricably linked and result in on-going, global
uncertainty.  Naturally, this impacts and influences the economy and business
sentiment here in New Zealand.

Our key markets continue to remain flat with the noticeable exception of
Christchurch, which is slowly gaining momentum and our business is well
positioned there.

In summary, the Board continues to be encouraged by the transformations
taking place.  Although the immediate results may be masked by the difficult
trading environment, the Company is certainly becoming 'stronger in every
way' and is well positioned for the future.

Before handing over to Chief Executive Officer, Dave Taylor, for his
presentation, on behalf of the directors I would like to thank Dave and all
of Steel & Tube's employees, based throughout New Zealand, for their
continued commitment and support.

CHIEF EXECUTIVE OFFICER'S ADDRESS

Just over two years ago Steel & Tube embarked on a major reinvigoration
programme with 'One Company' at its heart.  2012 has seen One Company deliver
significant and beneficial changes to our business and customers across  New
Zealand.  These positive improvements are both immediate and, we believe,
sustainable over the longer term.

In addition to One Company, other new initiatives are also underway to
complement and build on the work already completed.

Our staff and customers alike are readily engaging with One Company and the
new initiatives we have commenced.  Their enthusiasm for our refreshed
approach demonstrates a strong commitment to the Company and confidence in
our direction.

The Company's on-going reinvigoration is against a backdrop of continued
subdued economic activity.  We are seeing increasing variability at the
regional level and intense competition across all products and sectors,
particularly those heavily aligned to construction.

Christchurch rebuild activity is slowly improving.  However, this benefit has
largely been offset elsewhere across the country giving rise to a marginal
increase in the national steel demand year on year.  This is reflected in a
$20 million, or five per cent, increase in sales due to improved volumes and
pricing.

The six months to 31 December 2011 had sales revenue of $202.9 million and an
underlying net profit after tax of $6.4 million.  The second half had sales
revenue of $202.5 million and an underlying net profit after tax of $6.7
million.

The total sales revenue for the full year at $405 million was up $19.6
million or 5 per cent  when compared with the previous year.  Underlying
profit after tax of $13.1 million was down $3.9 million, or 23 per cent.

Operating cash flow remained strong at $18.8 million, an increase in $4.9
million or 35 per cent over the previous year.

A fully imputed dividend of 6.5 cents per share was declared and paid on 28th
September 2012.

Before commenting further on the business, I would like to remark on our
health and safety programme.  An absolute priority for the Company remains
the provision of a safe environment to protect our people as well as the
contractors and visitors to our sites.

This year, we increased our health and safety resources and considerably
raised the profile on the safety programmes we have in place.  In particular,
we focused on those workplace activities that have the potential to lead to
serious harm.  Pleasingly, the lead indicators, which are a measure of
actions and input to support the health and safety programme, have all
improved.

However, the number of lost-time incidents and medical-treatment incidents
over the year increased to a total of 14, with all but one being minor in
nature.  This number of incidents was disappointing given the commitment and
focus we have in place on providing safe working environments.

At the start of the year we launched the first Steel & Tube safety awards as
an annual programme.  The awards are designed to recognise and reinforce the
good behaviours and initiatives many of our people demonstrate day after day.

The programme culminated in an inaugural and highly successful safety awards
event, held here in Wellington.  Some 23 finalists attended and were
recognised for their commitment to safety either as individuals or as teams.
It is encouraging and pleasing to note for the first four months of this
financial year, our safety performance is improving.  So far this year, there
have been just two incidents compared with six incidents for the same period
last year.

As we indicated at the half year, activity levels remained subdued across the
three key sectors of construction, manufacturing and rural.  This appears to
be somewhat at odds with the general view of an economy slowly gaining
momentum.  No doubt the global issues in Europe, a slowing Chinese economy
and a high New Zealand dollar have influenced the local environment to
varying degrees.  Certainly investment sentiment has remained cautious and
measured.

The economic situation continues to restrain steel demand to levels that are
still more than 30 per cent down on the 2005/2006 peak and almost 25 per cent
down on pre-Global Financial Crisis demand.

Globally, the steel industry has struggled to balance production with
reducing global demands.  Both global and local steel prices have been
volatile.  This instability reflects the variability in both exchange rates
and raw-material pricing, albeit the latter against a declining trend.

Domestically, residential construction is improving, particularly in
Christchurch and Auckland, although other regions remain soft. Building
consents by value improved by 12.1 per cent to year ending June 2012 but from
a very low base.  Non-residential construction continues to languish, with
the year ending June 2012 seeing no appreciable change in the building
consents by value.

In Christchurch, rebuild activity is underway with residential and
infrastructure developments slowly increasing month by month, although the
peak rebuild activities remain some considerable time away.

Commercial activity is primarily associated with companies preparing for the
rebuild and establishing new or additional capabilities.  This activity is
generally in the suburbs.  However, the rest of the country remains subdued,
with commercial activity in Auckland being particularly supressed.

Excluding meat and dairy, seasonally-adjusted manufacturing volumes remained
flat through the period.  Although there was a lift in the second half,
global and local manufacturing indices signal a deteriorating outlook.

Rural commodity prices continued to soften throughout the period with
improved volumes offsetting some of the decline.  Concerns with the global
situation have impacted farmer confidence, thus curtailing activities in the
latter part of the year.

Therefore, unsurprisingly the steel industry remains very competitive and
those products aligned primarily to the construction industry, roofing and
reinforcing have had their margins impacted to a greater extent.  Despite
this, it is pleasing to see sales lift by five per cent due to both volume
and pricing, with market shares remaining steady or slightly improving across
most of our key product categories.

Notwithstanding the economic landscape, we have continued to pursue and
invest in the Company's reinvigoration programme and remain pleased with the
on-going external and internal support and encouragement we receive.

The supply-chain transformation continues.  Our newly-integrated supply chain
aims to deliver greater cost efficiencies whilst providing better product
accessibility and options for our customers.  New processes have and continue
to be implemented with the most noticeable impact to date being an inventory
reduction in excess of $13 million from the half-year position and $6 million
for the full year position.

Our facilities' rationalisation programme also continues.  For example, there
has been noticeable progress at our Nelson operation where three facilities
have been consolidated into one new one.  The new single site houses the
steel, stainless, fastenings and reinforcing businesses, as well as our other
product ranges, and greatly enhances Steel & Tube's profile in Nelson.

In Hamilton, the same approach will shortly see all Steel & Tube operations
on one site rather than three separate sites.

The current lease for the National Support Centre in Lower Hutt is soon to
expire.  We have taken the opportunity to move to a new office, also in the
Hutt Valley and which is supportive on the One Company approach.

Another important theme of the reinvigoration is building the skills and
expertise of our people as well as improving the capabilities and equipment
we have to service our chosen markets. Specifically, we have invested
heavily in two development programmes aimed at up-skilling all of our
operational managers and account managers.  Other people-development
programmes are being planned.

With regards to capabilities and equipment, we have recently commissioned new
plate-processing equipment to supply higher-quality finished processed plate
to the Auckland and the North Island market.

In Christchurch, we have allocated more resources across all parts of the
business as demand increases.  Processing equipment has been reviewed and
capital projects are underway to upgrade equipment in line with the
anticipated ramp up in demand.

We are putting greater emphasis on product development, as was signalled to
us as an opportunity for improvement in our customer surveys.  Earlier in the
year, we launched a new range of residential and commercial
seismic-reinforcing meshes that are fully compliant with the revised building
codes. The new-generation meshes, along with other products from our
extensive product portfolio, are aggregated under the One Company philosophy,
which has created the Steel & Tube 'Residential Offer' for builders and
merchants in Christchurch.

We also launched a new roofing profile, called ST963, which provides superior
strength and yield for the commercial roofing market.

This year we celebrated, through our Wire Processing business, 80 years of
manufacturing and distribution of the iconic Hurricane range of reinforcing,
fencing, fence panels, wire, gates and nail products for use in the rural and
building sectors.

The start of the new financial year coincided with price increases and
margins have improved. However, as the global steel industry grapples with
low demand, and fears of a 'hard landing' in China increased, raw material
prices and, in particular, iron ore prices fell to levels not seen for
several years. This along with the intense competition within the industry
has created downwards pressure on prices and hence margins.

However, in recent weeks as Europe appears less volatile and the Chinese
economic outlook a little stronger, raw material prices have rebounded, which
in due course will perpetuate steel pricing volatility in the domestic market
over coming months.

From a construction-sector perspective, New Zealand appears to becoming a
polarised economy with the Christchurch rebuild offsetting lacklustre
activities elsewhere.  Generally, outside of the Auckland residential
activity, both Auckland and Wellington markets remain subdued with little to
indicate an improvement in the short to medium term.

Metal-related manufacturing continues to languish and with an overvalued New
Zealand dollar, as well as restrained Australian and Asian economies, the
outlook in the short to medium term appears muted.

Despite increasing rural commodity prices, Fonterra have forecast a reduced
pay-out for farmers suggesting activity in this sector will remain soft in
the short term.

We remain pleased with the progress of One Company and the other initiatives
and despite the challenging external economic environment we feel cautiously
optimistic about the future.  Our people are energised by the on-going
regeneration, symbolised by our brand, the new facilities we are moving into
and the capability programmes being rolled out.
The divesture by Arrium and subsequent rebalancing of our share registry is
not only good news for New Zealand and our shareholders but also provides for
greater freedom to set our own course, particularly in a highly-competitive
industry.

However, as the Chairman alluded to, the on-going global uncertainties make
it difficult to predict the outlook with any degree of confidence in the
medium to short term.  Following the solid GDP performance of the first half
there are mixed views for the second half - some see the New Zealand economy
continuing to slowly gain momentum whilst others see the second half as
patchy and uncertain.  We tend to lean to the second view with the gains
around the Christchurch rebuild off-setting soft demand elsewhere.

Therefore, after four months of trading we expect the first half results to
be similar or marginally ahead of the same period last year.

 In conclusion I would like to reiterate how much the Company is enthused
about the new shareholding profile and the various initiatives that are
repositioning the business.  We have a strong balance sheet, generate strong
cash flows, have a strong product range and a strong customer base.

We are 'Stronger in Everyway'.
End CA:00229710 For:STU    Type:ADDRESS    Time:2012-11-14 12:00:04