N E W S
12 July 2018
No Steel & Tube dividend Steel & Tube Holdings is unlikely to pay
a final dividend this financial year and
may have to raise equity as its earnings
and debt come under pressure,
according to research house Craigs
Investment Partners.
The Lower Hutt-based manufacturer
and distributor of steel building supplies
warned that it expects to post a
2018 loss before interest and tax of
about $38 million and breach its banking
covenants after a restructuring that
will see it write down the value of its assets
by $54 million. It says it was seeking
a waiver from its banking partners
for the breach and expects to make a
decision on the payment of a final dividend
for the 2018 financial year, in line
with its policy, when the financial result
is finalised.
"While Steel & Tube expects to see
earnings improve due to its change
programme and is divesting assets,
this is a difficult position for a low-margin
cyclical business and places pressure
on the dividend and opens the
possibility of an equity raising," Craigs
research analyst Chris Byrne says in
his report titled 'Bent out of shape'.
Given the company's uncertain operating
environment, high gearing and
decline in underlying earnings, Byrne
expects Steel & Tube to cut its dividend
for the 2018 financial year to 7 cents
per share from 16 cents in 2017, in line
with its policy of paying out 60-to-80%
of normalised net earnings.
This would result in no final dividend
given it has already declared an interim
dividend of 7 cents per share, Byrne
says. He expects the company's net
debt to be more than $100 million at
the end of the June 30 financial year,
sitting at about four times underlying
earnings before interest, tax, depreciation
and amortisation.
"Unless Steel & Tube can drive significant
earnings growth in FY19, current
gearing levels open the door to a potential
equity raising," he says.
Byrne lowered his 12-month price target
on the stock to $1.50 from $2 in
his May 23 report. The shares recently
dropped 0.7% to $1.47 and have shed
29.5% this year.
Steel & Tube expects to release its
2018 results on August 31.
Mainfreight
profit rises 6.3%
on record NZ
trading
Mainfreight posted a 6.3% gain
in full-year profit on a record
result in New Zealand and growth
in Australia and said the strong
performance meant it would pay
record bonuses to its managers.
Profit rose to an all-time high
of $107.9 million in the 12
months ended March 31, from
$101.5 million a year earlier, the
Auckland-based company said
in a statement. Sales climbed to
$2.6 billion from $2.3 billion.
Asia was the only region to
produce disappointing earnings
in Mainfreight's latest year, in
what it described as a satisfactory
performance and "a strong
indication of our continuing
success in growing a global
logistics business". The company
declared a final dividend of 26
cents a share, making 45 cents
for the year, up 9.8% from a year
earlier, and Mainfreight says it
would also reward its team with
a 7.4 percent increase in their
discretionary bonuses to $20.7
million, the highest ever such
payout.
In the company's biggest market,
New Zealand, sales rose 9.3%
to $666 million and earnings
before interest, tax, depreciation
and amortisation rose
8.4% to a record $98.6 million.
Mainfreight's NZ logistics arm
added warehouse capacity and
its air & ocean business recorded
increased air and sea freight
tonnage "across both imports
and exports, including perishable
airfreight exports".
It says the local transport
division faced the most pressure,
with congestion at its sites in
Auckland, Tauranga, Rotorua,
Palmerston North, Wellington,
Nelson and Dunedin.
In Australia sales rose 16.6% to
$624 million and earnings gained
18% to $49.9 million. Mainfreight
said it was the best-ever result in
Australia with all three businesses
recording stronger sales growth.
Mainfreight shares last traded at
$25.75 and have edged up 1.4%
this year.
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Electric bike
wins Fieldays
innovation award
UBCO was presented the International
Innovation Award for its two-wheel drive
electric utility vehicle by Minster of Agriculture
Hon. Damien O’Connor at the
50th New Zealand Agricultural Fieldays.
Judges say the kiwi-based company
appears to have effectively analysed the
requirements of its target markets and
improved on previous models to create
the new and improved vehicle.
The 2018 UBCO 2x2 was praised for
being e-smart, eco-friendly and safer
than competing farm bikes and ATVs.
These features are sure to be appealing
to farmers right across the sector in
New Zealand and overseas, as well as
recreational and urban markets due to
its suitability on and off road.
UBCO ceo Timothy Allan says, “The first
heavy use owner said it was like walking
around his farm but quicker, so quietness
has turned out to be one of the most
important things this bike has brought
to the farm.
“As an electric vehicle it has a lot less
moving parts with the battery replacing
a gas tank and no use for an external
drive train means greater durability and
a longer life.
“Winning this award against major international
agritech companies is a huge
honour and a recognition for our team’s
hard work. With Fieldays being an internationally
recognised event, it provides
a great endorsement for this product in
the global farming community,” said Allan.