Before moving the adoption of the Accounts and Reports, I would like to make some brief comments about the company and its activities, and then ask our CEO Nick Calavrias to present his report.
Review of the Financial Year
Notwithstanding the difficult start to the year in review, I am pleased to be able to report that the performance in the second half of the year enabled the Company to deliver a sound result, in a slowing economy.
The Company generated sales revenue of $504 million and a net profit after tax of $22.5 million. This is a profit decrease of $5.2 million when compared with the previous year.
The Directors declared total ordinary dividends for the full year of 19 cents per share fully imputed.
This performance was achieved in a difficult trading environment for our key market segments, which were influenced by a volatile NZ dollar and an economy that slid into a recession in the second half of the financial year.
I will leave more detailed commentary on the Company’s performance to Nick Calavrias, but there are several issues that I would like to cover as we find ourselves in uncertain economic times, where the effects of the slowdown in the global economy on NZ, and in particular on Steel and Tube, are difficult to anticipate and to fully appreciate.
Around the world financial institutions have failed, share markets have collapsed, credit has dried up and consumer confidence has plunged. Governments are looking to ways to stimulate slowing economies and to restore a sense of direction.
In looking at the Company’s ability to ride out this volatile period there are a number of issues that are useful to consider.
We have had a strong first four months of trading, although the performance has eased since our most recent announcement regarding the first quarter. This provides a solid base for our actions to protect our performance and to continue to differentiate the Company as we prepare for the uncertainties of the second half of the financial year, and management have identified certain key areas of focus.
Customer service, which has been the cornerstone of our ability to maintain market leadership, is being reinforced at a time when our customers are likely to be under greater pressure.
The key to this service delivery is supporting our people. We have throughout the last few years been able to keep our best people and attract new talent when unemployment has been low. Our staff turnover rates are comparatively very low. With rising unemployment now, we will focus on high levels of performance from this effective team. Again in this last year we have offered our staff the opportunity to participate in our share scheme, and we have currently close to 300 staff who are shareholders. We believe that this is a valuable contributor to the relationship between our people and the Company.
Another aspect of our activities is concentrated on conserving resources, in which minimising energy consumption, reviewing and changing transportation systems and therefore costs, and minimising waste are examples of the areas specifically targeted in a review of manageable costs within the business.
It goes without saying that preserving cash is a fundamental element of conserving our resources. Sound inventory management is essential to this and we have a demonstrated track record in being able to deal with rapidly changing economic circumstances. In these times also, the potential for bad debts is generally higher, and the Company has enhanced its systems and processes, and increased its vigilance in response to this risk.
A strength that we have across the country is the diversity of market segments that we service, and we will build on the opportunities that this presents. We may for example be concerned about the ongoing difficulties in residential construction, but there is confidence about the pipeline of infrastructure projects and that the Company has traditionally been able to win a major share of this work.
The Company is continuing to focus on its safety performance and although we had more incidents of a minor nature last year, our lost time injury frequency rate has continued to reduce down to best international levels. As I have said before, we also know that this is a never ending pursuit and must be kept in the forefront of our people’s minds.
Last year I indicated that management would try to find growth opportunities that would allow us to leverage our skills, distribution network and customer base in other metals and products.
Although a considerable amount of good work was done during the year on a number of potential acquisitions, none was entirely suitable for us.
However one feature of the economic environment we face is that there are likely to be potentially more acquisition opportunities for strong companies like Steel and Tube.
In an environment where we can expect ongoing volatility in steel prices and in our exchange rate, the success of these kinds of actions within the Company will enable us to use our balance sheet and our skills to best deal with the considerable challenges.
The slowdown is being felt within the steel industry. Both demand and pricing are being affected and steel mills world wide are cutting production capacity in attempts to match demand which has slowed considerably. China remains a key factor in the outcomes.
The second half of this financial year will be therefore extremely challenging, but aided by a very good start with trading so far, the Board has confidence in management’s ability to ride out this period.
On behalf of the Directors I would like to acknowledge the ongoing contribution of CEO Nick Calavrias and his management team, and that of all our employees.
I also wish to thank my Board colleagues for their support. In particular I would like to acknowledge the work of Barry and Ian, who you will be aware had the carriage of our response to the proposal from Onesteel recently. They at all times acted most professionally and with the utmost integrity in what was a demanding exercise, although one for which a conclusion was not required. I thank them both sincerely for that.