Wellington steel product manufacturer Steel & Tube expects to benefit from the development of a new steel reinforcing mesh which improves the earthquake strength of houses.
The innovation could provide a timely sales boost for Steel & Tube, which yesterday reported a tax-paid profit of $13.1m for the year to June, down from $17 million as the construction industry continues to struggle.
A final dividend of 6.5c a share will be paid on September 28, taking the total dividend for the year to 12c.
Chief executive Dave Taylor said the grid-type mesh, made from a more ductile reinforcing rod from Pacific Steel, has a greater ability to stretch and return to its original shape.
The seismic mesh is encased in the concrete slab foundation of a house and requires more steel than traditional mesh. It is mandatory for all new houses in Christchurch.
Taylor said it was expected that the mesh would be used for new houses throughout the country.
Competitors were keeping sales close to their chest as they jockeyed for position in the new market, he said.
However, the company's results had been affected by minimal growth in its three key sectors: construction, manufacturing and rural, this year.
The subdued economy meant demand for steel at 665,000 tonnes, while slightly up on last year, was still well down on the peak of 970,000 tonnes in 2005, Taylor said.
Total sales for the year increased by 5 per cent to $405m or $19.6m.
There was a marginal improvement in the second half of the year, with profit after tax increasing slightly to $6.7m.
Construction was slowly improving with the value of residential building consents increasing by 12 per cent in the June year from a 40-year low last year, Taylor said.
In contrast, the value of consents for the more critical non-residential market for Steel & Tube grew just 0.2 per cent, also from a low base.
“The lack of non-residential activity is of concern and is likely to continue to challenge margins.”
Manufacturing remained flat till the March quarter, with higher metal product manufacturing offset by reduced manufacturing of machinery and equipment.
While the number of dairy farm conversions was increasing, investment in other farming operations was expected to slow due to weakening commodity prices and the high New Zealand dollar, Taylor said.
The Wellington market had progressively deteriorated during the year, with little sign of improvement, and Auckland's economy appeared to have entered into “another period of subdued activity”, despite a pick-up in residential building.
“On a positive note there are signs the rebuild in Christchurch is underway, albeit slowly,” Taylor said.
There was also good demand from Taranaki's oil and gas industry.
The Christchurch rebuild was being led by residential construction, infrastructure and companies preparing for the rebuild, he said.
- © Fairfax NZ News
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