Vulcan Steel Faces Profit Slump Amid Market Challenges, Eyes Growth Opportunities

Challenging Market Conditions Weigh on Vulcan's Earnings

Vulcan Steel Limited has released its interim report for the first half of FY25, revealing a period marked by significant economic headwinds across its core markets in Australia and New Zealand. The company’s revenue contracted by 12.6% year-on-year to NZ$493 million, reflecting an 8.3% decline in sales volume and a 4.7% drop in revenue per tonne. Net profit after tax (NPAT) fell sharply by 64.8% to NZ$9.2 million, underscoring the pressure on profitability amid subdued demand and pricing challenges.

Despite these setbacks, Vulcan managed to sustain a return on capital employed (ROCE) of 10.3%, a respectable outcome given the difficult trading environment. This was supported by disciplined cost management, with operating expenses reduced by NZ$1.4 million year-on-year, and a strong operating cash flow of NZ$81 million, driven by effective working capital controls.

Segment Performance Highlights

The company’s Steel segment experienced a 16.8% revenue decline to NZ$209.9 million, with sales volume down 8.8% and gross profit per tonne falling by 14.5%. The Australian market, particularly Victoria, showed notable weakness, while New Zealand volumes contracted more sharply. EBITDA for this segment dropped 41.8%, reflecting the tougher conditions.

Conversely, the Metals segment demonstrated more resilience, with revenue decreasing by 9.2% to NZ$283.1 million and EBITDA falling 16.2%. Gross margin percentages remained steady, highlighting Vulcan’s ability to maintain pricing discipline and cost efficiency in this division.

Strategic Initiatives and Operational Discipline

Vulcan continues to invest in its growth strategy, focusing on expanding its geographic footprint, product offerings, and operational efficiencies. The company has fully integrated its aluminium business and introduced 13 hybrid sites to enhance service delivery and cost control. Notably, group operating expenses per tonne increased by 8%, a consequence of lower volumes, but overall OPEX was reduced year-on-year.

Financial prudence remains a priority, with net debt reduced by NZ$34 million to NZ$242 million and capital expenditure guidance for FY25 revised downward to NZ$25-30 million to reflect timing adjustments. The board has also adjusted its dividend policy, lowering the payout ratio to 40-80% of NPAT to balance shareholder returns with investment needs.

Outlook: Signs of Recovery Amid Regional Variability

Looking ahead, Vulcan anticipates a mixed but cautiously optimistic outlook. The New Zealand market shows early signs of volume recovery, supported by the Reserve Bank of New Zealand’s recent interest rate cuts and positive customer feedback. In Australia, Queensland and Western Australia are expected to outperform, while Victoria’s steel segment faces ongoing challenges.

The company plans to continue rolling out hybrid sites and exploring acquisition opportunities to strengthen its market position. Vulcan’s management remains focused on maintaining high service levels and financial discipline to navigate the remainder of FY25 and capitalize on an anticipated economic upswing.

Sustainability and Safety Commitments

Vulcan also reaffirmed its commitment to health, safety, and environmental stewardship. The company launched a Safety Step Change Programme and adopted AI-assisted video technology to mitigate workplace risks. Emissions remained stable year-on-year, with ongoing initiatives to reduce environmental impact, including a shift to hybrid vehicles and electric trucks.