On 31 August, our guest speakers were Mark Malpass (CEO) and Richard Smyth (CFO) of Steel & Tube Holdings. The overall purpose of the company is ‘Making Life Easier for Customers needing Steel Solutions”.
Steel is one of the world’s most essential and sustainable building products, used for seismic strengthening, rebuild activity and essential water services, is for-ever re-usable, the most recycled substance on the planet. There is reduced construction waste, it is durable, offers advantage in climate change and extreme weather events, and is non-toxic and inert
Mark talked about their journey to be the best in the sector, the preferred choice for steel products and solutions. Reference was made to their progress since 2018. They have achieved their second highest ever revenue return, record net cash flow, and no bank debt (though they can call on a $100 million bank facility if required to fund growth).
The business is operated through two divisions: distribution (products from preferred steel mills and distributed through their national network), and Infrastructure (products which require some processing before sale, typically on a contract or project basis, including on-site installation services).
The distribution products include steel, piping systems, chain and rigging, fastenings, rural products and stainless steel, brought in as it is and passed on to the clients. Two recent acquisitions, Fasteners NZ and Kiwi Pipes and Fittings, have proved very useful in this division. Their most recent initiative has been entry into the aluminium market.
Mark and Richard presented a table to support their argument that Steel & Tube offers New Zealand’s most comprehensive range of steel products and services. There were six other companies referred to in the table and for four of the eight products listed they only have 2-3 competitors, in plate processing, coil processing, stainless steel, and roofing.
Then there was a description of the steel market and its outlook. Macro opportunities have arisen from climate resilience, infrastructure, and essential water services. Examples are, and have been, the Napier Port, Nelson Port, solar farms, wind farms (as the preferred supplier for Meridian), coastal protection, bridge rebuilds, and projects such as hospitals.
The recessionary environment may continue into 1H24. But they expect 2H24 will see easing of macro trends – interest rates, labour market, construction, and cost inflation. Steel pricing volatility has reduced and stabilised above pre-Covid levels.
The Government infrastructure budget will rise to more than $71 billion over the 2022/2026 period. Overall, there is in excess of $92 billion of value in the pipeline because of rebuilds after the recent weather events, and major projects across health, education, community facilities, social housing, energy, water, and transport. Mention was made of the Golden Homes steel framing contract and they have a Kainga Ora contract for four years.
Steel and Tube are pricing about 250 projects per month and are always examining their pricing points.
Steel & Tube spend a lot of time asking for employee feedback. There are programmes for school leavers, Maori cadetships, Work from Home policies, wellness, financial coaching, and assistance with NZQA qualifications. This support helps to convey the impression of the company as an attractive employer. Paying the Living Wage and above reduces the need for employees to seek a second job and are able to give the main effort to their company.
Mark and Richard were certainly enthusiastic about their company and the use of steel. But they also provided a good overview of the economic direction of New Zealand and the role of steel in future development projects. It was an upbeat and comprehensive forward looking overview.
Cliff Thomas