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Steel & Tube reported a net profit of $30.2 million for the year ended June, up from $15.4m the previous year. Photo / Supplied

Steel & Tube nearly doubled annual net profit as it fattened margins amid volatile prices and as it reaped the benefits of five years of restructuring.

The steel products distributor reported a net profit of $30.2 million for the year ended June, up from $15.4m the previous year.

Its gross margin rose to 22.3 per cent from 20.4 per cent as normalised earnings before interest and tax (Ebit) rose to $47.9m from $19.7m. The margin includes freight, direct and subcontract labour.

"We are seeing the benefits of our focus on operational excellence and supply-chain management which has allowed us to control costs and deliver improved performance in a more challenging environment," said chief executive Mark Malpass.

"Despite the volatile steel pricing environment, rising costs and continuing supply chain disruption, we have been able to source, supply and deliver products to our customers in a timely manner," Malpass said.

The company will pay a final dividend of 7.5 cents per share, taking the full-year payout to 13cps, up from 4.5cps the previous year. The dividend accounted for about 71 per cent of adjusted profit, about the middle of the policy to pay out between 60 per cent and 80 per cent.

Steel & Tube shares jumped as much as 4.8 per cent, or 7c, to $1.53 after the results and were recently quoted at $1.52. That's still down nearly 2 per cent year to date.

Malpass said continued investment in digital technology is delivering improved customer service and efficiency.

"We will continue to build on our core strengths and are excited about the growth opportunities we are investing in."

The company is particularly focusing on growing high-value products and services.

Revenue was up 24.6 per cent to $599.1m but volumes were only up 5.7 per cent to 167,000 tonnes.

Malpass said despite the inflationary environment, there will always be strong demand for steel.

"Pricing is expected to remain at current elevated levels for the balance of the calendar year. As shipping and supply-chain congestion eases, inventory cover levels are expected to reduce," he said.

Inventories jumped to $192.5m at June 30 from $113.5m a year earlier while the company experienced a $34.1m operating cash outflow compared with a $29.3m inflow the previous year.

"Steel & Tube's journey has taken us from a relentless focus on cost and operational discipline under 'project strive' to now having the foundation and ability to focus on growth and building a more diversified and resilient business," Malpass said.

"Our two primary strategic pathways are continuing to strengthen our core and investing in high value products, services and sectors to drive gross margin improvement," he said.

One opportunity is in added-value plate processing and the company has invested in new equipment to expand its processing capability.

Another example is the July 2021 purchase of Fasteners NZ, "a niche operator that has performed extremely well in full-year 2022", he said.

More recently, the company bought Kiwi Pipe and Fittings on August 1, which will provide it with scale and market share growth in the fire and water reticulation sector.

"This acquisition was immediately earnings positive and expected to add over 0.5c to earnings per share in full-year 2023."

Malpass said Steel & Tube's primary focus is on organic growth, but it will still look at small, bolt-on acquisitions and review direct adjacent sectors.

The current strategic initiatives won't be fully reflected in the results until the 2024 financial year, he said.

He's expecting continued volatility with steel pricing remaining elevated but with strong near-term demand continuing.

Longer-term, demand in some sectors may moderate. "Our goal is to continue to deliver sustainable double-digit growth."