Shareholder
Newsletter
June 2024
Company Update: CEO and Chair
It is no secret that 2023 and the 2024 year to date have been challenging for New Zealand businesses, marked by a notable reduction in spending, cost cutting and projects and investments put on hold. This has a ripple affect across the supply chain, including impacting steel distribution and processing businesses like ours. Despite this, Steel & Tube has continued to strengthen customer relationships, maintain market share, grow margins and significantly improve operating leverage to position itself for New Zealand’s economic recovery. We have continued to focus on what we can control and explore new opportunities to grow higher value products and services.
While economic headwinds are expected to persist for much of this year, we remain focussed on our strategic goals. The macro-trends and opportunities for our sector remain strong, our dual pathway strategy is delivering tangible and valuable results and we have a lean and efficient operation. We are well positioned for demand growth when it returns, with quality inventory on hand, strong customer relationships and significant operating leverage.
Steel is one of the world’s most essential and sustainable building products – permanent, forever reusable and the most recycled substance on the planet. For many construction applications, steel is the only choice. We have the expertise and the products to deliver innovative solutions in a future where climate change is likely to become more common.
Aligning our structure for success
We have proven the value of our growth strategy and are now actively exploring new opportunities. Our recent successful introductions of aluminium and plate processing, and purchase of Fasteners NZ and Kiwi Pipes gives us confidence in our direction. Most recently, we have announced the expansion of our specialist trucking fleet, through an acquisition that is expected to reduce our freight costs and be immediately earnings accretive. You can read more on this below.
To support our growth further, we have established a dedicated Strategic Growth team, under the leadership of long serving executive, Mac Hainen, who was previously GM of our Distribution business.
Having successfully led a turnaround in our Reinforcing steel business, Peter Ensor’s role has been expanded to GM Major Projects, overseeing large projects from tender to completion. As companies become more selective with their investments, a strong track record of successful project completion becomes even more critical. Peter’s role will ensure we are well positioned to capture attractive projects.
Supporting our people
The current economic climate has also meant things have become tougher with personal finances. We are continually seeking ways to support our people – from our Back to School fund helping with the myriad of expenses at the start of a school year, through to our popular wellbeing workshops. This year, we have offered Mental Fitness coaching with great advice on how to turn plans into success and reality; and also gave away a free series of personalised one-on-one wellbeing coaching to one lucky team member. We also provided our team with access to a series of financial education workshops being run through ANZ Bank.
Making life easier for our customers
Our overarching goal is to ‘make life easier’ for our customers – in this dynamic environment, we’ve remained flexible and are working to support our customers through value added services as we continue providing the quality and delivery reliability they expect. Members of our senior leadership team regularly join our Customer Service (CX) people, to listen to customer calls. This helps us better understand what we do well, what we can do better and how our CX team is tracking with customer experience. Our test at the end of the call is always a simple one - “did we just make life easier for them?”.
FY24 Guidance
Steel & Tube continues to deliver margin growth, cost reductions which have offset inflation and resilient operating profit. Our investment strategy into high value products and services is delivering results and we have built a robust balance sheet which is capable of enabling further growth, both organically and through acquisition.
We recently provided earnings guidance for the FY24 year ending 30 June 2024. We are forecasting Normalised EBIT1 of $14m to $15m and Normalised EBITDA of $35m to $36m. Net cash on hand is expected to be between $7m and $10m at year end. The Board remains committed to delivering value for shareholders and expects to declare a final dividend for FY24.
RoadEx Aqusition
In April 2024, we announced the expansion of our fleet of specialist steel freight trucks, with the acquisition of 20 trucks and eight trailers, as well as a great team of drivers. These will add to our existing fleet and service the upper North Island, providing improved service for our customers and positive earnings for our company.
Direct ownership of this element of specialist freight services to our customers is strategically important and part of our "Strengthening the Core" strategy. Freight is the third largest cost element of the steel supply chain. Having control of our own local freight services reduces costs and helps improve margins. It also gives us control over routes and delivery schedules.
Freight services is an important part of our service proposition and drivers are a key interface with our customers. We intend to invest in technology to provide additional benefits for our customers, such as real time delivery information and "sign on glass" technology, which will further differentiate our offer.
We’re continuing to look for similar opportunities where there’s an alignment with our strategy and purpose.
Project Strong
Twelve months ago, we commenced Project Strong to increase our warehouse capacity and improve our service offer and productivity. Work has progressed well and we are now in the final stages to enable full capacity.
Over the last year, we have reconfigured and reduced our West Auckland warehouse size and invested in an upgraded Fortress Fasteners trade shop on this site. This has enhanced our presence, with rent savings helping to offset lease cost pressures across the business. We have also consolidated our palletised operations at our Auckland East Tamaki site on Bruce Roderick Drive.
We have invested in new racking to optimise our footprint, as well as new warehouse management technology and systems. This has doubled our effective Auckland warehouse capacity and allows us to store a larger range of high value distribution products in one place – delivering improved productivity, utilisation and customer service.
A total of $1.5m capital will be invested in Project Strong, with our landlord funding 1/3rd of this. In FY24, we expect a one-off operating expense of around $3m as we complete this important project.
Steel & Tube has invested in its Waikato customers, with a brand-new roofing site, purposely designed to process orders faster and meet the demand for roofing products across the region. The new site at 49 Chalmers Road is positioned alongside our near-new distribution site at 4 Chafer Place, providing easy access for our customers.
The new location has proved valuable to our customers, being positioned between connecting roads Wairere Drive, Avalon Drive, Te Rapa Road, and State Highway 1C, providing close access to Hamilton and the wider districts across Waikato.
As well as the convenient location, 49 Chalmers hosts a range of smarter layout choices, providing more space for staging, loading, and production. We'll have much greater order capacity to meet Waikato's roofing needs. Read more here.
Four years ago we launched our digital ordering platform – the first in our industry. At the time there were a few concerns it wouldn’t take off because many of our customers had traditional ways of working. It’s fantastic to see how this has evolved and how important it’s become for customers who want to do their business online and at times that suit them.
Since launching the webshop in August 2020, the number of customers with webshop logins ordering online has grown to over 3,600, with around 320 customers logging in each day. More than 170,000 different products have been ordered through the webshop. Customers are not just using it to make ordering easier and more efficient, they’re also checking on their invoices and researching the best products for their jobs with real time pricing and inventory status.
Customers can check on their order’s status and track its delivery, view quotes and previous invoices, their account status, and keep up to date with payment information.
The webshop is becoming an increasingly important revenue stream and we continue to get more and more customers trading with us on-line as we add better features and keep investing.
Sam Reindler is the new GM Freight, Logistics and Distribution Centres for Steel & Tube, bringing his experience in project management, operations and commercial management to the role.
An Engineering graduate from Auckland University, Sam started his career with KiwiRail, before moving to London to gain valuable international experience. On his return to New Zealand, he worked with Auckland Transport and Waste Management, before joining Steel & Tube in January 2022 as National Commercial Manager for the Reinforcing Business.
Sam says supply chain management is becoming increasingly important in a global economy, providing opportunities to enhance efficiency and service delivery for Steel & Tube.
“The steel sector is surprisingly fast paced and we need to ensure our product ordering, arrival and distribution systems are seamless and efficient. I’m also excited with the opportunities that technology offers to help our teams work smarter in our warehouses. The challenge is to adopt technology sensibly in a way which is matched to our size and scale to deliver value to customers. Steel & Tube is an inspiring place to work, I’m surrounded by a team committed to achieving great things.”
Outside of work, Sam enjoys being outdoors, tramping, skiing or surfing. “Any trip into the mountains is a balm to the busy rhythm of the day to day”, he says.
He describes himself as the type of person that thrives on challenges and lists some of his personal wins – from working professionally as a young Engineer in the UK to keeping Auckland’s kerbside waste collection running reliably through Covid. He also recently completed the 70km kayak leg of the Coast to Coast as part of a Steel & Tube team.
WHAT MATTERS
Celebrating women in the steel industry
International Women’s Day is an opportunity to celebrate our amazing female team members. It warrants a special acknowledgement, because although we continue to make grounds to even the participation rates in our sector with almost 30% of Steel & Tube’s workforce being female, the reality is that the steel (and building products) industry remains a male dominated area. And until there’s equal levels of participation, the females in our team are a minority who have chosen to carve out a path in our sector.
In keeping with the day, we held a great session with Te Kahukura Boyton, Founder of Māori Millionaire, for a Financial Wellbeing session. Statistically females typically experience lower superannuation savings and life time earnings – particularly through less time in the workforce to raise families - so advice on bridging the gap is something Te Kahukura provides specialist advice on.
Photographer: Colleen Tunnicliff
Transforming the Woollen Mills site in Onehunga into a modern industrial campus was the work of JWA Architects. Lining the signature saw-tooth roof and exterior walls, Steel & Tube’s Legacy™ profile brings a sophisticated accent to this award-winning 15,000 sqm build.
Paying homage to an historical part of Auckland, JWA Architects has repurposed and expanded the original 19th-century Woollen Mills building, once famous for its Princess wool blankets. New materials include pre-cast concrete, glass and aluminium curtain walling, and our Legacy tray profile for wall and roof cladding.
Retaining the original brick building as the anchor for the site, the architects introduced the unmistakable 18th-century standing seam style of Legacy, in COLORSTEEL®Flaxpod, to create a design connection between old and new.
‘We wanted to ensure a strong presence on Neilson Street that responded positively to the historic Woollen Mills site,’ said JWA Architects founder Jonathan Walker. ‘The new saw-tooth roof reflects the original Victorian factory roofline, giving the site a strong identity in South Auckland.’
Product selection criteria included: durability and performance; efficient installation and low maintenance; environmental compliance; and cost-effectiveness. As an architectural cladding system and roofing choice, the Legacy profile provides a vintage character, with sleek, modern lines to blend old and new.
‘It’s a great product to use,’ says Jonathan. ‘Detailed well, it withstands even harsh conditions.’ Legacy’s robustness and low upkeep requirements make the profile a popular choice for many projects.
The old Woollen Mills site has a new lease of life, once again a hub of local industry amid a trendy and bustling commercial area. This pioneering rejuvenation has won praise from both the architectural industry and local community, the development bringing energy and identity to Onehunga. Read more here.
1Normalised EBITDA and Normalised EBIT have been adjusted to exclude non-trading adjustments of c.$3.5m relating to Software as a Service costs and Project Strong
