The Reserve Bank of New Zealand kept interest rates steady at its February 28 policy meeting. Just as well, because the recent 12 months of rising rates has cooled the New Zealand economy something fierce. Clear evidence of this can be found in the drop in home consents and in the performance of Steel & Tube, Fletcher Building and Vulcan Steel (details later). Stats NZ reports there were 1,991 new homes consented in January 2024, down 28% compared with January 2023. “Fewer new homes were consented in January 2024 than in each of the previous five January months,” said Stats NZ´s construction and property statistics manager, Michael Heslop. In January this year there were only 899 stand-alone houses consented, down 16% compared with January 2023. “The last time less than 1,000 stand-alone houses were consented in a month was April 2012 when 959 stand-alone houses were consented,” Heslop said. Steel companies are noticing the downturn. In the six months to December 31 last year,

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thus the first half of FY2024, Steel & Tube says subdued volumes were seen across all sectors. In its unaudited report for 1H2024, Steel & Tube said volumes were down 5.1% on 2H2023. Revenues were likewise down 4.4% to $261.8 million. Nevertheless, chief executive, Mark Malpass, said Steel & Tube ended the half year with no bank debt and a positive cash balance of $26.3 million. In addition, the company has an undrawn $100 million bank facility in place to support growth. Malpass said conditions are expected to remain challenging in the short term.

In announcing Fletcher Building´s results for the first six months of FY2024, its chief executive, Ross Taylor, said: “Against the backdrop of materially weaker trading conditions, particularly in the NZ residential sector where volumes declined 20%, Group revenue of $4,248 million was in line with the prior period’s $4,284 million. EBIT before significant items was $264 million, compared to $360 million in the prior period. The Group reported a net loss after tax of $120 million, compared to a profit of $92 million in the prior period. Disappointingly, the result was heavily impacted by the $165 million significant items provision on the New Zealand International Convention Centre announced on February 5 and a $122 million non-cash impairment and write-down on the Tradelink Australia business.”

Vulcan Steel saw difficult trading conditions drive the steel distributor’s Australasian earnings down by 30% in the first half of FY2024. The company’s earnings before interest, tax, depreciation and amortisation fell to $81.8 million in the half from $115 million in the previous corresponding period. Meanwhile its net profit after tax dropped by 52% to $26.1 million. “Higher interest rates continued to impact on business activity and investment appetite,” said Vulcan´s managing director and chief executive, Rhys Jones. High inflation also added to the pressure on business costs. The company said its expectation is for New Zealand´s trading volume to begin to recover from the second or third quarter of the 2024 calendar year.

Returning attention to Fletcher Building where February was a busy month in many ways. The company had to refute media speculation that it was considering an equity raising. Then the media wrongly reported that Fletcher´s Iplex business was up for sale. In fact, Fletcher confirmed it would commence a process to sell the Tradelink business. Then, in mid-February, the company announced that the Group´s chief executive officer, Ross Taylor, had given the Board notice of his retirement. Further, as part of a Board renewal review being undertaken, chairman Bruce Hassall will step down from the Board at the company’s annual shareholders meeting later this year.

Mr Hassall said: “The Board, Ross and I believe it is in the best interests of the business and the team that he handover to a new leader and that I hand over to a new Chair at the time of the ASM in October.” Mr Taylor has a six-month notice period, which he will serve in full if required, to facilitate an orderly handover to his successor.