All indicators had been pointing to a significant downturn in the New Zealand steel industry. Now, various high-profile company results for the year ended June 2024 are brutal evidence of that downturn. In announcing its results during August, Steel & Tube said domestic and international economic conditions had led to a significant decline in activity which had prompted a 21% reduction in volumes. Steel & Tube´s revenue fell 19% to $479.1 million, whereas it had achieved $589.1 million in the 2023 fiscal year. The company’s net profit for the year fell 85% to $2.6 million. CEO of Steel & Tube, Mark Malpass, said: “In what has been a year of significant economic slowdown across New Zealand, we have delivered a solid financial result. Our focus through this downturn has been on controlling the controllables by strengthening customer relationships, maintaining market share and growing higher value products and services, managing costs and expanding our cross-sell opportunities.” Over at Fletcher Building

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the figures for FY2024 were likewise grim. Earnings before interest and tax for continuing operations and before significant items was $509 million, down 35% from $785 million of FY2023. The Group reported an after-tax net loss of $227 million for the year, compared to a net profit of $235 in FY2023. “Market volumes declined materially in FY2024. In New Zealand, market volumes fell 25% and in Australia market volumes fell 15%, each compared to the first half of FY2023, resulting in substantial revenue declines in our materials and distribution businesses,” said Fletcher Building´s acting CEO, Nick Traber. Meanwhile, Vulcan Steel which distributes steel throughout New Zealand and Australia saw its net profit after tax decline 55% in FY2024 to NZ $40 million. This was on the back of earnings before interest, tax, depreciation and amortisation falling 29% to $147 million. Vulcan’s Managing Director and CEO, Rhys Jones, said: “Business conditions in FY2024 remained challenging across most markets, especially in New Zealand following a difficult 2023. Higher interest rates continued to impact on activity levels. High inflation added to the pressure on business costs.”

Mark Malpass at Steel & Tube said his company had shown resilience during the downturn and could take some comfort in the fact that operating cashflows had remained strong and net cash was $8.7 million at June 30, with no borrowings. In saying the company was well positioned for demand growth when it returns, Malpass said: ”While the timing and pace of an economic recovery remains unclear, our expectation is that conditions should start to improve in the 2025 calendar year.” He noted that the Government´s May budget had allocated $68 billion to infrastructure work over the next five years and is in the process of approving fast track consent legislation, which will improve infrastructure activity in the medium term. Looking to the future, Nick Traber at Fletcher Building said: “We expect the year ahead to remain challenging, with macro-economic pressures likely to persist through the year. At this point, we are planning for FY2025 market volumes in our materials and distribution businesses to be 10% to 15% lower year-on-year compared to FY2024. However, we remain vigilant to further market weakness.” Rhys Jones at Vulcan welcomed the mid-August decision by the Reserve Bank of New Zealand (RBNZ) to reduce interest rates. He said this would provide relief to the domestic economy and should prompt an improvement in steel consumption in New Zealand during 2025; whereas the continued tight monetary policy in Australia would constrain economic activity. Vulcan therefore expects its trading levels in the first half of FY2025 in Australia and New Zealand to remain at low levels, similar to those of the second half of FY2024. It´s worth mentioning that when it cut the interest rate, the RBNZ said it expects New Zealand to tip back into a technical recession this year after suffering a similar slump in both 2023 and 2022.

The monthly figure issued by Stats NZ showing the number of homes consented for building approval is one of those key data points which had been shouting for some time that a downturn in the steel industry must certainly be happening. Unfortunately, the latest figures suggest the decline continues. Figures released on August 30 show there were 33,921 new homes consented in New Zealand in the year ended July 2024, down 22% compared with the year ended July 2023. Within that figure, the number of multi-unit homes consented was down 28% and stand-alone houses were down 14%. Fewer houses, less steel needed.

Finally, Fletcher Building has announced the appointment of Andrew Reding as Group Chief Executive Officer and Managing Director. Mr Reding will assume those two roles from September 30. Fletcher Building acting Chair, Barbara Chapman, said: “Andrew is a highly experienced business leader who has held numerous key operational leadership roles in the construction materials and building products sectors over the past 35 years, including 11 years at Fletcher Building. He is an industry veteran who brings a unique combination of skills and experience, and a performance and values mindset.” One of the issues it appears Reding will not have to deal with is the matter of Fletcher Building´s subsidiary, Iplex Pipelines Australia. At the end of August, Fletcher Building announced that Iplex together with the Western Australian Government and key industry stakeholders, had reached an in-principle agreement to address plumbing failures occurring in some WA homes constructed with Typlex Pro-Fit pipe. The parties have entered into a JIR (joint industry response) and, on the assumption that the JIR is finalised, Fletcher Building expects to record a pre-tax provision of AUD $155 million in its FY2025 financial statements.