Steel & Tube Holdings Limited – briefing document

1
2016 annual
Update
Dave Taylor, CEO
Janie Elrick, CFO
August 2016
2016 Annual
update
Dave Taylor, CEO
Janie Elrick, CFO
August 2016

Disclaimer
This presentation, February 2017, provides additional comment on Steel & Tube’s
financial results announcement for the period ending 31 December 2016. It should be
read in conjunction with the documents attached to that announcement, which
highlight future outlook expectations of earnings, activities and market conditions.
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Financial Highlights –H1 ending December 2016
Revenue: $254m –down $11m or 4%
Profit before Tax: Underlying$14.6 m –up $ 0.5m or 4%
EBIT Underlying:$16.1m–up $0.3m or 2%
Net operating cash flow:$14.0m –up $4.7m or 50%
Net tangible assets / share:$1.49c –down $0.10
Net debt:$114.8m –up $17.5m
Dividend / share:9 cents/share –consistent
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Overview H1 2017
Improving performance invariable markets
4
Global
Markets
Local
Markets
Operating
Performance
Impacts
•Domestic market increasingly more competitive
•S&T’s focus aimed at improving margins
•Preparing S&T Plastics for new contract commitments
•Overhead reduction through restructuring
•Ongoing investment to update capabilities including Composite Floor Decks Ltd
acquisition
•NZ volumes 860 tonnes, compared to 980 tonnesin the last construction peak
•Construction buoyant however activity variable
•Manufacturing remains resilient
•The rural sector has indicated renewed investment due to higher dairy payout,
optimism returning, other rural sectors positive
•Global steel prices firming, following significant increases to key input costs; iron
ore, coking coal and international freight. Volatility expected to continue
•Excess capacity in both raw materials and finished steel remains with Chinese
commitment to remove excess/aged steel making capacity and coal mines
•Anti-dumpling legislation continues and Chinese exports reduced by 3%

Overview H1 2017
Operating performance
5
Quarter 1
Price
Increase
Volumes and
Market
Share
Managing
costs
•Business restructuring. H1 costs of $800k with annualisedbenefits of $2.8m
•Costs: resolution of quality issues, litigation and M&A activity $2m.
•Preparing S&T Plastics for new contract commitments impacted EBIT by $1.6m
•Remain on track with strategic targets
•Volumes and share retained in most product categories
•Short term price and margin focus led to some volume impact and loss of share
particularly in Reinforcing and commoditisedsteel products
•Volume loss is primarily in low margin product
•Monitoring closely to achieve optimum outcome
•Despite global pricing increasing, NZ pricing proving difficult to shift up
•Inconsistent behaviourfrom competitors
•Reinforcing prices at multi-year lows despite construction activity
•S&T’s focus on pricing and margins saw margins increase; 22.7% -25.4%
•With global steel prices firming, new price increase February 2017

Overview H1 2017
Continued rejuvenation
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Facility
upgrades
ERP
Inventory
CFDL
Acquisition
•Selective procurement at end of H1 in anticipation of price increase
•Stock weeks remain at 13~14, despite higher stock weeks from Stainless and
MSL businesses offsetting reductions in other parts of the business
•SKU rationalisationcontinues ~90,000 to 55,000 (excluding MSL)
•Pilot “go-live” occurred 3 October 2016
•Implementation proceeded as expected, initial issues, but nothing fundamental
•Good feedback for the rest of the business go-live, which is aimed for April-June
2017
•New Dunedin facility to open February 2017
•Christchurch Distribution facility re-development $10m, early 2018
•Christchurch Processing facility –Goodman facility, opening late 2017
•$15.9m (incl. $3m earn-out)
•Expected Annual revenue $22m, EBIT $4.5m~$5m
Building
Capability
•Leverage capabilities across all parts of S&T
•Ongoing L&D investment
•Bench strength continues to improve

Overview H1 2017
Acquisitions
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S&T
Stainless
MSL
S&T Plastics
Integration
savings
•Longer term strategic investment; reflects significant upgrades required to NZ
“water infrastructure”
•Focus on preparing the plant for the next tranche of schemes
•Remedial activity, higher than expected (H1 impact $1.6m)
•Resourced with experienced plastics capability
•Significant commitments awarded for 2017-18 currently at $27m
•Continues to perform well and will exceed business case revenue in F17
•Benefitting from competitor closures
•ERP platform for back-office integration and business enabler
•Inventory and warehouse management to be aligned, commencing late 2017
•Synergies already achieved: ‘One Company’, supply chain, freight rationalisation,
etc.
•On track to deliver business case earnings
•Significant synergies with other parts of S&T business
•Annualisedrevenue ~ $22-$23m, EBIT $4.5-$5m
CFDL
•Continues to outperform acquisition expectations
•Comflorbusiness reflects growth in construction activity
•Stainless & Engineering steels consistent with overall market
•Pilot for ERP, insight and learnings for the remainder of the Group

Overview H1 2017
Product conformance
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Commerce
Commission
& SE 62
Mesh
•CC investigation, 3 companies to be prosecuted and 2 others issued warning
•CC intends to prosecute S&T for the inadvertent use of a testing laboratory logo,
and for S&T application of the testing methodologies under the standard
•Prosecution does not relate to the performance of the mesh product
•All S&T mesh is now tested by IANZ accredited laboratories
•Class action –no direct contact with promoters

New Zealand Markets
Diversification across sectors, significant presence in buoyant construction sector
Source: S& T Research
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Source: SBB & S&T Financial reports
Strong performance, despite falling steel prices
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•Falling steel prices
since 2011, have been
offset by improved
business performance
•Steel prices have
started to recover
paving the way towards
improved results in the
medium term

Business Performance
In-line with previous guidance
Source: S&T financial reports
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*
* Sale of Bowden Rd $6.2m

Business Performance
Cost management
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One-off

Business Performance; EBIT comparison
Price impacting base business, acquisitions performing well
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14
Balance Sheet
Liquid assets, gearing sound

Business Performance
Operating cash remains strong
Source: S&T financial reports
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Outlook
Improved earnings expected –second half
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Global Pricing
S&T Plastics
Significant factors
•Price increase expected across most product
categories February 2017 onwards
•Plant prepared to deliver new contracts
•$27m: $8m in H2 2017
Costs and
Restructuring
•Legal & one-off costs $1.9m
•$2.8m annualisedsavings
•ERP –further rationalisation
CFDL Acquisition
•Full 6 months performance
•Amortisationof customer relationships will
impact EBIT $1.5-$2.5m
F17 EBIT outlook consistent with F16 EBIT

Outlook
Further out
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Global Steel
Environment
Domestic market
Significant factors
•Pricing volatility likely to continue for both raw
materials and finished steel
•Excess capacity likely to remain despite
Chinese efforts to reduce
•Anti-dumping actions to remain
•NZ demand to remain around 860 tonnes
•Stainless volumes to increase
•Competition to remain intense
S&T Strategy
•Strengthen ‘One Company’ ethos
•Reposition underlying cost structures
•Enhance capability and reach
•Integrated value propositions
•Leverage technology

Outlook
Improving performance
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Global
Markets
Local
Markets
Operating
Performance
Financial
Outlook
With increased prices in F17, and one-off costs minimised
expect significantly higher earnings in F17
•Focus on delivering the renewed strategy and initiatives
•Aquaduct potential to be realised
•Synergies from MSL to continue to be delivered
•Almost 10% price increase 1 July 2016, early days but promising
•The New Zealand economy, appears remarkably resilient, particularly
our key sectors –construction & manufacturing
•The rural sector has re-aligned to new dairy payout, optimism
returning, other rural sectors positive
•World steel demand remains soft, with oversupply in both raw
materials and finished steel, encouraged by prices increased in early
2016, iron ore firming, and steel pricing following
•China commitment to remove excess/aged capacity

19
2016 annual
Update
Dave Taylor, CEO
Janie Elrick, CFO
August 2016
Thank you

Global Markets
Steel production
•Domestic demand for steel in China has
risen recently with banks easing credit
•Exports out of China has been dropping
over the past 6 months
•Steel prices have started to firm across
most products and geographical
locations
Source: World Steel Association & SBB
•Global steel output has dropped by 0.8%
during 2016 compared to PCP led by
China which dropped 1.2%
•China has shed 45 MT of capacity in
2016 and plan to do more this year
•Indian steel production however grew
and is third after Japan
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Global Markets
Steel and raw material price movement
•Iron ore prices increased to USD 80/ tein
spite of increased capacity in Australia and
Brazil. Uneconomic mines closed in China
contributed
•Coking coal price spike has eased due to
Chinese working days restriction relaxed
•Finished steel prices still firming
•Chinese steel exports have reduced by
3% in 2016
•Expect Chinese steel capacity reduction to
continue in the medium term
•India is now the third largest steel
producer after Japan and increasingly
looking to export
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Source: Steel Business Briefings-SBB

Global Markets
Stainless steel prices and production
Source: Steel Businesses Briefings and International Stainless Steel Forum
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•Production declined marginally in 2015 and
current trends indicate a drop in 2016
•China is the leading producer and is
following the global trend
•Demand forecast is positive despite the
current downtrend
•Prices correlate closely with nickel prices
which remain volatile

Global Markets
Exchange rates
•The NZD has
appreciated in recent
months against key
currencies
•Remains elevated
against the AUD
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Source: ANZ Bank

New Zealand Markets
Material volumes
Source: Stats NZ; S&T Research
•Total steel demand is marginally down year
on year.
•Construction activity supports steel demand
•Stainless steel demand is recovering due to
viticulture and improved dairy prices
•Fastenings market growing and less
vulnerable to volatility

New Zealand Markets
Key sector trends –building consents
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•Non Residential building consent by
floor area reduced 20% in 2016
•Canterbury reduced by 34%, Auckland
by 24% and all other regions by 9%
•Conversely, consents by $ value shows
a growth of 4% nationally
•Residentialconsent by floor area
increased by 12% in 2016
•Auckland increased by 11%, more than
off-setting a 9% reduction in Canterbury
•All other regions increased by 25%
Source: Stats NZ

New Zealand Markets
Key sector trends –rural
Source: ANZ Bank
•With international dairy prices
firming to 2½ year high, forecast
pay-out increased to $6.55/kgms
•The improvement in prices has
been attributed to increased
buying demand, particularly China
•The increased pay-out is likely to
be above the direct cost of many
of the dairy farmers which is
estimated at $5/kgms
•Likelihood of investment returning,
impacting stainless demand
•Meat and wool prices while
volatile, seems to be more stable
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New Zealand Markets
Key sector trends –manufacturing ($m)
•Output continues to firm
•Solid growth from non food
and non petroleum sectors
•Equipment and machinery
manufacturers nearing pre
GFC levels
•Metal producers growing at
a slower pace
•Export markets for
manufactured goods
remain resilient in Australia
and USA
Source: Stats NZ
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