Ann: ADDRESS: STU: Steel & Tube Annual Meeting

• Release Date: 14/11/14 13:00
• Summary: ADDRESS: STU: Steel & Tube Annual Meeting
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					STU
14/11/2014 13:00
ADDRESS

REL: 1300 HRS Steel & Tube Holdings Limited

ADDRESS: STU: Steel & Tube Annual Meeting

Annual General Meeting 2014

Address by Steel & Tube Chairman, Sir John Anderson

Our 2014 financial year ushered in a positive economic sentiment and with it
came expectations of a firmer economic footing, set to position the New
Zealand economy for expansion.
These expectations slowly materialised, as activity levels and volumes
increased across most of our sectors and product categories, led by the
Christchurch and Auckland construction sectors.
Consequently, the company enjoyed a strong year - and continues to deliver
solid year-on-year improvements.
It reported a net profit of $17.9 million - a 15 per cent improvement on last
year's profit of $15.6 million.
Our decision to invest in increased inventory in the first half of the year
to support the expected growth in steel volumes was rewarded with revenue of
$441 million - a 12 per cent increase compared with $393 million for the
previous year.
However, this ongoing investment reduced our operating cash flows by 55 per
cent to $12.3 million compared to $27.5 million last year.
Total equity increased by $3.2 million, to $160.4 million.
Total assets increased by $54.6 million to $277 million, compared to $222.4
million the year before.
The group's debt-to-equity ratio of 26.8 per cent continues to be at a level
that enables the Group to leverage against its assets if required.
The Board remains committed to providing shareholders with a consistent
dividend stream.
We declared a dividend of 7 cents per share in March, and a final dividend of
9 cents per share in September - bringing the total dividends for the year to
16 cents. This represents a pay-out ratio of 78 per cent.
Our acquisition in April this year was a significant milestone.
The company, which now trades as S&T Stainless, is an excellent strategic fit
for Steel & Tube.
With the addition of some unique product offerings and specialist expertise,
the newly combined business places Steel & Tube in a very clear leadership
position in the stainless and engineering steels market.  As well, its
ComFlor steel floor decking system has excellent potential.
This year, S&T Stainless contributed $13 million to the Company's revenue and
we fully expect to see total Group revenue exceed $500 million in the current
2014-15 financial year.
Elsewhere, the company continues to invest for the future, leveraging its
strong balance sheet.
You will hear today, from CEO Dave Taylor, about the many ways in which the
extensive investment programme - involving new premises, plant, machinery,
communications and online business platforms - is set to fortify capability
and capacity as well as enhance service and add value for customers.
Moving on to the Board of Directors...
In line with our constitution, and NZX rules, myself and Rosemary Warnock
must stand for re-election.
Both Rosemary and I have made ourselves available for re-election as
independent directors. This will be addressed later in the proceedings.
And so I come to the outlook...
Globally, there is disquiet in a number of countries.
Correspondingly activities continue with a degree of fragility.
Against this backdrop the New Zealand economy remains relatively robust,
although the first few months of this current financial year have had a
moderating effect.   This is restraining the growth that was experienced last
year.
That said, the key area of construction continues, with focus on Christchurch
and Auckland.
Investments in dairy processing continue, despite what will inevitably be a
short-term decline in commodity prices, providing a good outline for the
stainless business.   Manufacturing appears resilient.
The investments being made across Steel & Tube continue to improve the
performance of the business, and will increasingly allow the Company to take
advantage and improve its top and bottom lines.
The Company remains in solid shape with a good balance sheet, allowing for
further growth opportunities if, and when, they present themselves.
Before I hand over to Dave Taylor for his presentation, on behalf of the
Directors I would like to extend our sincere thanks to Dave, his leadership
team and all of the staff at Steel & Tube, for their ongoing commitment to
excellence, which the Board acknowledges as creating a strong foundation for
the company for the foreseeable future.
Thank you.

Address by Steel & Tube CEO, Dave Taylor

Thank you Sir John, and good afternoon ladies and gentlemen...
The past year has been a significant one for Steel & Tube on a number of
levels and I'm delighted to be able to share with you today some of our
successes:
- Our April 2014 acquisition of the company now trading as S&T Stainless
positions us as New Zealand's leading stainless and engineering steels
business, adding an additional eight facilities and several thousand more
customers to those already with Steel & Tube

- This puts us on track to becoming a company with a 500-million-dollar
revenue in 2015

- Our One Company operating model has assured our participation in some of
the country's key infrastructure initiatives, providing innovative and
specialist solutions to projects that help grow, sustain and revitalise our
cities, towns and communities

- Our $30m investment programme has kicked off with new buildings, new
machinery, new digital hardware, to be followed by a new business process
system, all of which will deliver value by enhancing the customer experience

- Our group net profit is up,  with earnings per share rising to 20.4 cents

- We have also celebrated 60 years in business - growing,  innovating and
competing to create a company stronger in every way
In reflecting on our 60 years it has been pleasing to be able to look back at
the many milestones that have led us to this point.
For any business to be successful it needs to adapt over a long period and I
believe Steel & Tube is an effective example of this.
It is testament to the quality of our business partnerships, our ability to
adapt to changing market needs and our commitment to delivering quality and
service.
This year, that quality and service has been further enhanced by our
acquisition of S&T Stainless, formerly a division of Tata Steel International
- one of the world's largest steel producers.
The acquisition was a natural coupling for Steel & Tube:

- Both businesses are seen as highly complementary on a number of fronts.
Both enjoy extensive geographic coverage, Stainless leads in plate, sheet and
coil offerings, Steel & Tube in long products and fittings.

- Stainless also brings with it some unique products - ComFlor is one -
supported by specialist expertise.

As a result, our new entity offers opportunity for both companies to grow
faster together, with an ability to create value through new and innovative
customer solutions.
A bigger organisation - we now have around 800 staff - also offers more
opportunities for our people, and the ability to grow a culture that
recognises, promotes and rewards high performers, positioning Steel & Tube as
an employer of choice in New Zealand.
All of this underlines the ongoing need for Steel & Tube to remain agile,
flexible, and open to new opportunities and new ways of working.
To underpin this, our wide-ranging change agenda, which began with our One
Company reinvigoration, continues.
Part of this includes an extensive integration programme, building on the
best of both organisations as we bring our two companies together in ways
that will benefit our people, our business and our customers.
Across New Zealand, our One Company model continues to yield tangible results
for our business.
From roading, to historical, cultural and sporting facilities, this year
Steel & Tube has continued to provide inventive and specialist solutions to
projects that help develop, sustain and re-invigorate our cities, towns and
communities.
In Wellington our focus has included the National War Memorial Park, part of
the Government's cornerstone project to acknowledge the centenary of the
First World War.
We're very proud to be a part of this important cultural and historical
upgrade - supplying 2000 tonnes of reinforcing steel to line the floor, walls
and roof of the recently opened Arras Tunnel.
In Auckland, work continues on the revolutionary Waterview Connect project -
part of New Zealand's largest and most complex infrastructure developments -
creating a ring road around our biggest city.
Our specialists identified and located a purpose-built fusion-welding
machine, which has helped manufacture 3,500 tonnes of steel into 120,000
straight and radial reinforcing cages for the tunnel's 24,000 concrete
segments.
In Hamilton, the challenging double-curved roof on the $28.5m Avantidrome
required a complex design solution to meet weatherproofing and internal
moisture requirements.
Our technical team led a custom-made solution for the nearly 7000 square
meters of roofing and cladding on the building, using our trade-marked and
patented ST963 metal roofing and cladding profile.
And in Christchurch, following the devastation caused by the earthquakes of
2010 and 2011, we have participated in one of its most iconic building
projects, delivering several product lines into the city's Transitional
Cathedral
Elsewhere, One Company has created opportunities for us to contribute across
a number of regional projects.
The  Len Lye centre in New Plymouth, Waikato milking systems, and the
recently opened  Waiarohia Stream Bridge in Whangarei  provide evidence of
the One Company value-add, offering greater certainty and an assurance that,
through Steel & Tube,  our customers have access to the highest-quality
solutions the market has to offer.
As part of our $30 million reinvestment programme two new purpose-built
facilities are underway in Auckland.
These will enhance our processing capability and efficiency, and better
service the expanding North Island building and construction requirements.
In October, our purpose built facility in Palmerston North opened, co-housing
our Processing, Distribution and Stainless operations and providing our
customers with easy access to our products all under one roof.
The way in which organisations connect with their customers and the services
they provide are becoming more sophisticated every day.
We continue to take advantage of this ongoing shift in expectations by
providing our customers with the products and services they want, where and
when they want them.
Technology is a key enabler to this. Back in the '90s, Steel & Tube was one
of the first companies to introduce the online JDE business process system,
commonly referred to as Enterprise Resource Planning or ERP.
Today, new digital hardware across all our sites is strengthening our
communications capabilities, so we can have faster, easier interaction with
our customers. And we are developing a new business management system that
will provide us with a 360-degree view of customer buying habits, making life
easier for them to do business with us.
As always, the health and safety of our people underpins everything we do and
remains fundamental to the way we operate.
In the past year we have continued to strengthen health and safety engagement
among our teams and motivated participation in targeted initiatives,
promoting robust root-cause analysis and safer operating procedures for those
involved in transporting our product.
The success of these initiatives is reflected in the key indicators we use to
measure our safety performance.
- This year our near-miss incident reporting has doubled
- Medical Time Incidents have reduced
- Lost Time Incident frequency rate - at 1.5 - remains well below the World
Steel Association average.
Moving on to the trading environment...
From a wider, industry perspective, we have seen economic activity - and
consequently volumes - improve across most sectors, although volatility
remained, given the project nature of some of our key sectors.
- Construction activity remains robust, especially residential construction,
led by Christchurch and Auckland

- Non- residential construction continues at a slower pace - with
Christchurch and to a lesser degree Auckland - off-setting benign activity
elsewhere. Infrastructure work remains strong and the reinforcing business in
particular is experiencing strong volumes

- Manufacturing continues to be volatile, with those who export struggling
against an over-valued dollar. The dollar depreciation of recent times should
help and it is pleasing to see the recent improvement in this sector

- In the rural sector, the reduction in global dairy commodity prices has
seen some investment cancelled, although investments in additional processing
capacity, for the longer term, continue

- Oil and Gas activity has reduced considerably and, although this had
commenced in the latter stages of the previous financial year, it is not
likely to improve until the 2015 calendar year.
Over-capacity in steel manufacturing is a continuing issue. Despite some
older mills closing, and domestic demand across Asia softening, China
continues to increase its output.    The result is that we have seen both raw
material and finished steel prices softening throughout the period.
And with competition intense across many key products and market sectors,
margins remain restrained.
Stainless volumes remain solid and, with nickel prices up 9 per cent this
calendar year, coupled with the lower dollar, prices have firmed
And, as we look forward...
We had expected the month-on-month growth experienced last year to continue
into this current financial year. However, in recent months, the pace of
growth has eased.
Although the cause of the moderation is unclear, it is probably a combination
of the uncertainty created by the September election, the declining commodity
prices and the impact of the increase in interest rates, all taking effect.
With the industry remaining very competitive, and against a global backdrop
of softening raw material and finished steel prices, pricing has remained
subdued.
However, the recent dollar depreciation does mean that overseas product is
now more expensive to import which will need to be recovered in the coming
months, therefore increasing steel prices in the domestic market.
Pleasingly the stainless market remains strong and S&T Stainless continues to
perform in line with expectations.
As a consequence, we expect the first half results to reflect the six months
trading of S&T Stainless and a more buoyant market than the comparable period
last year.
As a team we remain focused on continual improvement, and over the coming
year we will identify ways to advance our systems, process effectiveness and,
ultimately, our profitability.
Behind every successful team lies a group of specialist, skilled and highly
professional people.   As part of our 60th anniversary this year we have
developed a customer-centric video that highlights the ways in which our
people and our One Company ethos continue to deliver results, both internally
and externally.
We'll play it for you at the end of our proceedings today, just before we
break for refreshments. It offers an excellent window into our world and the
many great things our company is doing, as we go from strength to strength.
Thank you.

[Ends]
End CA:00257688 For:STU    Type:ADDRESS    Time:2014-11-14 13:00:08