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Speaker 1: The information provided in this program is of a general

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Speaker 1: nature and is not intended to be personalized financial advice.

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Speaker 1: We encourage you to seek appropriate advice from a qualified

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Speaker 1: professional to suit your individual circumstances. This steel supercenter can

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Speaker 1: store twelve thousand tons of the commodity, more than twice

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Speaker 1: the amount used to build the Auckland Harbor Bridge. Why

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Speaker 1: this site has been built in a construction downturn, we.

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Speaker 2: Call it the sugar rush.

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Speaker 3: I suppose commodity prices went up through the roof. Volumes

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Speaker 3: went up through the roof. Demand was very high. We

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Speaker 3: knew what comes up. It's got to come down on.

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Speaker 1: The dollar figure on how much steel you've imported to

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Speaker 1: stockpile here. Though.

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Speaker 4: What's that?

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Speaker 2: Well, it's a long term plan.

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Speaker 3: As MS has been around for one hundred years with

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Speaker 3: whether many cycles. This we see is just another cycle,

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Speaker 3: and you've just got to hold your nerve and it

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Speaker 3: will it'll pay dividends.

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Speaker 1: This is the infrastructure behind industrial infrastructure. A brand new

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Speaker 1: fifteen thousand square meta logistics facility in Drury, south of

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Speaker 1: Auckland has been made to store thousands of tons of steel,

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Speaker 1: beans and pipes. This site was designed and built specifically

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Speaker 1: for Asthmus, a privately owned steel importer that was started

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Speaker 1: by Henry Asmus in nineteen twenty and carried on by

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Speaker 1: his son William.

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Speaker 4: The business has been behind.

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Speaker 1: Some of the country's most significant bills, including the Marsden

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Speaker 1: Point former oil refinery, the Waikatour River hydro dams, the

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Speaker 1: Huntley Power Station and Wellington's Waterfront Stadium. Its latest expansion

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Speaker 1: is proof that it's still growing and gearing up for

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Speaker 1: more major projects as the economy improves and efforts get

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Speaker 1: underway to fix our infrastructure deficit.

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Speaker 3: So we started building this in June two thousand, in

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Speaker 3: twenty three.

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Speaker 4: So, Jick, you moved in a few months ago.

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Speaker 2: Yeah, the build was thirteen months.

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Speaker 4: That is crazy.

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Speaker 2: It is very good.

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Speaker 1: As Mus brings in steel from mills around the world,

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Speaker 1: from Australia to South Korea, China, Thailand and Taiwan, making

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Speaker 1: it one of the more globally connected New Zealand operators.

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Speaker 1: So how do you think about the geopolitics of the

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Speaker 1: world right now given that you import from all of

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Speaker 1: these countries like China, Taiwan.

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Speaker 3: Look, it's interesting times. I think for us, we've just

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Speaker 3: got to be mindful make sure that we've got alternatives,

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Speaker 3: and we have, so that's amazing.

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Speaker 1: Dean Brown has been leading the Asthmus Group for the

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Speaker 1: past six years. He did the deal to lease out

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Speaker 1: the site. In this interview, we discuss why he's confident

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Speaker 1: the commodity will stay in demand after its price has

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Speaker 1: fallen over the past two years.

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Speaker 4: Dang, thank you so much for having us here. Good

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Speaker 4: to be here.

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Speaker 2: Welcome, thank you coming to jury.

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Speaker 4: You are most welcome. It's awesome. This is very cool.

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Speaker 1: I love hard commodity stuff like this, so I'm very

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Speaker 1: pleased to be here.

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Speaker 4: I guess the first question.

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Speaker 1: Is why why build aware of this scale and especially

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Speaker 1: why now?

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Speaker 2: Why now? Why now? Is getting ready for when the

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Speaker 2: market picks up.

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Speaker 3: But we have been had this in the pipeline probably

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Speaker 3: for the last four or five years. To find an

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Speaker 3: existing DC to stock steels very challenging, so we knew

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Speaker 3: we had to do a design and build started on

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Speaker 3: that journey before COVID. We parked it when COVID hit,

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Speaker 3: and probably about six twelve months later, we were up

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Speaker 3: to our guns with stock and we thought, right, we've

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Speaker 3: got to get this project back on the table. And

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Speaker 3: we had still sitting in three sites around Auckland. One

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Speaker 3: site we owned, the other two sites we leased, So

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Speaker 3: it made sense to get everything under the one roof.

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Speaker 4: You see when the market picks up.

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Speaker 1: Yes, so it was up, like you mentioned, demand skyrocketed.

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Speaker 1: It's now fallen quite dramatically with the state of our economy.

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Speaker 1: Talk to me about the demand dynamics right now and

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Speaker 1: why you're still bullish enough on construction this country which

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Speaker 1: gives you the confidence to build this now.

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Speaker 3: Well, the market is cyclical and we've had a great run.

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Speaker 3: You know, I don't think any of us could have

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Speaker 3: imagined how well the how well the industry went, you know,

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Speaker 3: twenty one to twenty two.

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Speaker 2: We call it the sugar rush.

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Speaker 3: I suppose commodity prices went up through the roof, volumes

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Speaker 3: went up through the roof.

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Speaker 2: Demand was very high.

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Speaker 3: We knew what comes up, it's got to come down,

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Speaker 3: so as even keeping by board at at ease and saying, look,

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Speaker 3: enjoy it while we can, but we know it's going

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Speaker 3: to come down off the high site. But we saw

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Speaker 3: no other time better now because we needed to do

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Speaker 3: this bit of work. And it's probably been a blessing

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Speaker 3: in some ways that we're doing it in the quiet

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Speaker 3: time because we can still maintain a very good service level.

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Speaker 3: But we are confident that the market will pick up again.

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Speaker 3: There's just so much infrastructure investment that's required across New

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Speaker 3: Zealand and as for Asthmus, we want to be ready.

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Speaker 3: So the time has.

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Speaker 2: Actually worked out quite well as far as.

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Speaker 3: Trading at the moment, it's tough, though it'd be fair

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Speaker 3: we are to say, look, the last six months we're

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Speaker 3: on the bottom. We're waiting for it to pick up.

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Speaker 3: I think it's going to be probably challenging times probably

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Speaker 3: for the next six to twelve months, to be honest.

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Speaker 4: So you're an importer, Yes, we have commodities, so is

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Speaker 4: all of the steel around us.

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Speaker 1: All of these beams. Are these pre purchased or you've

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Speaker 1: just imported these and expect to sell them at the

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Speaker 1: same price that you purchase them, or at a high

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Speaker 1: price in future for future projects.

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Speaker 4: How does that show it?

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Speaker 3: So look, yes, all this is for stock, so these

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Speaker 3: are for orders that we have not received yet, so

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Speaker 3: it is a big investment. We do indents as well,

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Speaker 3: so those indents will come from our supply straight to

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Speaker 3: the customer. But all this which you're seeing in this

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Speaker 3: warehouse is stocked for projects.

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Speaker 4: How much is it here at the moment?

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Speaker 3: Well, at the moment we've come in and look, it's

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Speaker 3: always hard to design a DC because if you build

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Speaker 3: it too small, you don't have enough capacity before the

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Speaker 3: paint's even dried, and if you go too big, especially

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Speaker 3: in Auckland where property prices are high, so you've got

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Speaker 3: to find the right balance.

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Speaker 2: So we did quite a lot of modeling. We've come

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Speaker 2: in here.

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Speaker 3: We're around fifty five percent capacity at the moment, so

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Speaker 3: we've got room to grow. And then we've also got

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Speaker 3: a plan B of what we do next in five

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Speaker 3: to six years if we are at capacity. So this

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Speaker 3: DC has been designed to supply the Golden Triangle for

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Speaker 3: want of a better word. Even though we have branches

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Speaker 3: in Hamilton and branches in Twonger, a lot of the

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Speaker 3: big structural steel will be fed from here straight down

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Speaker 3: to those sites as well.

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Speaker 4: Goldilocks. You want that size to be to be just right,

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Speaker 4: that's right.

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Speaker 1: Can you give me a dollar figure on the investment

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Speaker 1: or even something ballpark because I know that you're a

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Speaker 1: private operator and you're probably don't want the exact dollar

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Speaker 1: amount out there.

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Speaker 2: Look, the investment's a big Look the lands, the land

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Speaker 2: out here.

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Speaker 3: This is a two hectare site, so you're talking, you know,

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Speaker 3: you're talking over sort of fifteen to seventeen million for

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Speaker 3: the land, and then the build itself is around about

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Speaker 3: twenty five million for the build.

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Speaker 2: So these are investments that you need to make on.

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Speaker 1: The dollar figure on how much steel you've imported to

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Speaker 1: stockpile here though, what's that Well, it's.

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Speaker 3: A long term play and you're taking that on a

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Speaker 3: long term position, right, And it's where we're back in ourselves.

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Speaker 3: As MS has been around for one hundred years with

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Speaker 3: weathered many cycles. This we see is just another cycle

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Speaker 3: and you just got to hold your nerve and it

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Speaker 3: will it'll pay dividends.

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Speaker 1: What about New Zealand's current infrastructure environment, the money going

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Speaker 1: to it, the confidence being thrown at it. What about

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Speaker 1: that gives you confidence that you can make at this big?

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Speaker 3: Well, you for us making a bit too big. It's

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Speaker 3: we consolidated three sites, so we had to do it

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Speaker 3: for our own business. We needed to do it to

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Speaker 3: improve operational efficiency and improve safety as well.

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Speaker 2: It's a fast, safer site. Everything's under hook, everything's undercover.

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Speaker 3: So we need to do that regardless, Otherwise you decide

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Speaker 3: are we going to be in the market, So you

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Speaker 3: either get in boots of wall or you decide to

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Speaker 3: make the decision to get out. And we see it's

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Speaker 3: an important part of the market. There's a lot of investment. Yes,

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Speaker 3: it's slowed down with cost of finance inflation.

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Speaker 2: A lot of big projects are coming to an end,

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Speaker 2: but there's.

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Speaker 3: A lot of other work that's in play, and once

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Speaker 3: that picks up, we'll be ready.

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Speaker 1: Bottom line, we have an infrastructure deficit and you're getting

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Speaker 1: ready to help fill it.

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Speaker 3: Correct And this has been a huge enabler for us

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Speaker 3: because our property in Mount Wellington where probably probably sixty

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Speaker 3: percent of the steel in this building was on that site.

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Speaker 3: Jury has been an enabler for us to develop that

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Speaker 3: site now. So we have started an eight million dollar

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Speaker 3: reinvestment on that site, building all the offices total new

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Speaker 3: fit out, get people back to work, get people back

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Speaker 3: in the office, and then the back part of that building,

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Speaker 3: which is about a ten thousand square meter warehouse as well.

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Speaker 3: We're in the process of redeveloping stage two of that now,

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Speaker 3: putting a whole new racking system in palette racking and

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Speaker 3: that's for our valve and fitting business again, all targeted

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Speaker 3: getting ourselves ready for the infrastructure investment when.

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Speaker 2: It does happen.

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Speaker 1: Tell me about the kind of projects that your products

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Speaker 1: go into.

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Speaker 4: You said, Asthmus has been around for over one hundred years.

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Speaker 1: It was started in nineteen twenty, which is a very

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Speaker 1: long time ago.

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Speaker 4: Incredible that it's been around for that long.

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Speaker 1: What kind of projects has Asthma's been involved in and

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Speaker 1: what kind of projects going forward you're expecting to sell

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Speaker 1: your products.

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Speaker 3: Asmus has been involved in some of the biggest infrastructure

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Speaker 3: projects in New Zealand, you know, back through to a

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Speaker 3: lot of the think big projects, Hunty Power Station, a

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Speaker 3: lot of the hydro stations, geothermal, Marsden Point Refinery in

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Speaker 3: nineteen sixty five, we supplied.

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Speaker 2: A lot of ows into that.

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Speaker 3: That's amazing, so very strong pulp and paper with the

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Speaker 3: likes of OG.

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Speaker 2: In that market. We supply those industries today.

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Speaker 3: The Central Interceptor has probably been one of our most

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Speaker 3: recent where we supplied a number of our into that project,

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Speaker 3: but also polyethylene pipe as well, so we extrude polyethylene

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Speaker 3: pipe for water pressure systems. We make that in Hamilton,

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Speaker 3: so we're supplying those sort of projects as well.

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Speaker 1: Think Big was a great initiative for businesses like this.

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Speaker 1: Do you think we need something like that again? Or

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Speaker 1: if I can ask that another way, is your business

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Speaker 1: hoping that we see something like that again in this country?

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Speaker 2: Look, I think we are hoping for it.

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Speaker 3: I think New Zealand needs investments and we can't do

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Speaker 3: it alone. And I think it's how does the government

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Speaker 3: attract good offshore strategic partners who can help us get there,

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Speaker 3: because I don't think we're going to get there alone,

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Speaker 3: but it needs to happen. You can't not do the maintenance,

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Speaker 3: you cannot repair the pipes. This work has to be done.

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Speaker 3: So we're just being patient. I think our cels, our competitors,

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Speaker 3: a lot of our custom in that civil infrastructure market,

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Speaker 3: we're all being patient at the moment. It was great

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Speaker 3: to hear the government talk about the fast track projects

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Speaker 3: and release of one hundred and forty odd projects. Which

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Speaker 3: are they going to try and get those moving? But

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Speaker 3: at this stage it's talk. What we're all looking for

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Speaker 3: is the action right and then things will start moving again.

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Speaker 1: Let's talk about steel demand globally, it's been falling, yes,

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Speaker 1: for the past three years. According to the World Steel Association,

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Speaker 1: if we do have an uptick care that would be

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Speaker 1: a tiny blip to help production globally. What are you

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Speaker 1: seeing with the businesses that you deal with? Can you

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Speaker 1: import from yes, around the world. Are they struggling? Are

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Speaker 1: they glad that you're at least buying their products?

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Speaker 3: Well, I think they're glad we're buying. I think, look,

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Speaker 3: there is more demand. There's more supply than there is

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Speaker 3: demand out there. China sort of sets the pace as

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Speaker 3: far as what's happening with prices.

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Speaker 2: Out there in the marketplace.

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Speaker 3: Their exports out of China have increased dramatically over the

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Speaker 3: last few years. And then Jina's trying to you know,

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Speaker 3: they've introduced the stimulus to get infrastructure going again there,

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Speaker 3: but that is going to take some time. So I

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Speaker 3: think we I think we we think we're at the bottom,

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Speaker 3: like we're not quite back where we were pre COVID.

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Speaker 3: But that said, you know, energy costs for making steel

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Speaker 3: has increased, labor costs has increased, shipping costs have increased.

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Speaker 4: Yet the steel prices down.

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Speaker 3: And the steel prices have come down deserts and you've

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Speaker 3: just got to navigate that and you've just got to

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Speaker 3: you've just got to pick your battles of what projects

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Speaker 3: you go after, and sometimes you've just got to take

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Speaker 3: a pause and be patient as well.

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Speaker 1: So you're quite wise then, given that there is excess capacity, yes,

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Speaker 1: and steel, and you're buying and you can stock pilot.

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Speaker 1: This stuff isn't food, it doesn't expire. It may rust,

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Speaker 1: but you can clean it and it's still usable.

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Speaker 4: Right, pretty wise, that's correct.

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Speaker 2: But you need to have the range and you need

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Speaker 2: to be ready. And we're still moving.

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Speaker 3: You know, our volumes are down probably around about five

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Speaker 3: to six percent down on last year, so we're managing

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Speaker 3: our position. Okay, look, we're expecting the market to soften

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Speaker 3: and we've just got to ride through it.

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Speaker 2: Now.

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Speaker 3: I'd like to be the optimistic and saying is going

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Speaker 3: to come right early next year, but I honestly I

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Speaker 3: think it's going to take a bit longer than that.

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Speaker 1: But what I said to you is that this is

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Speaker 1: the infrastructure behind the infrastructure. This is the construction supply chain.

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Speaker 1: How critical is all of this, the product, the commodity

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Speaker 1: behind the scenes to actually making construction happen in this country.

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Speaker 3: It's very important because they need you know there's some

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Speaker 3: customers who will indent for large projects, but you still

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Speaker 3: need the local stock. Your lee time for this product

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Speaker 3: is twelve to fourteen to fifteen weeks wow, So a

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Speaker 3: lot of our ordering were fitting in with the mill

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Speaker 3: runs overseas, so they are the long lea times as well,

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Speaker 3: so you need to accommodate that.

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Speaker 1: So effectively you want constructors to come to you. You've

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Speaker 1: got the product ready to go, so you're in front

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Speaker 1: of line.

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Speaker 3: That's correct, absolutely, and look, it comes look as steel

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Speaker 3: is a commodity, but it's more than just steel. It's

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Speaker 3: about look table stakes as we're all bringing in quality

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Speaker 3: product from repidal mills that meet a standard. I think

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Speaker 3: some of the differentiators are your people. It's certainly your

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Speaker 3: service delivery model is really important. The relationships your people

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Speaker 3: have is very important. And making sure your people got

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Speaker 3: the product knowledge right so you can still differentiate in

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Speaker 3: a commodity.

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Speaker 2: But it's still very tough, you know.

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Speaker 3: And look, we've all come off very high stock levels,

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Speaker 3: so the market I think a number of us where

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Speaker 3: our stock levels increase eighty percent from where they were

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Speaker 3: pre COVID.

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Speaker 2: We've all rebalanced back a lot better now.

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Speaker 4: How much down are you from that?

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Speaker 2: Now we're down. We're down.

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Speaker 3: We got very high at the peak, had the tiger

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Speaker 3: by the tail, if you wanted to call it. I

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Speaker 3: was looking for other sites around Auckland to stock steel

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Speaker 3: because what was happening is a lot of the shipments

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Speaker 3: were being consolidated.

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Speaker 2: So while we thought we.

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Speaker 3: Had a thousand tons comeing into the port, there could

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Speaker 3: be two thousand tons come into.

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Speaker 2: The port and you had to clear it very quickly.

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Speaker 2: So that was very challenging.

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Speaker 1: We have domestic steel manufacturers in this country, so you

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Speaker 1: do why should the big projects use imported steel instead.

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Speaker 2: The domestic steel.

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Speaker 3: As far as New Zealand Steel, and they're a great

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Speaker 3: partner of ours. The plate you saw out under the canopies,

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Speaker 3: majority of theirs from New Zealand Steel.

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Speaker 4: A Fletcher Steel sign on there.

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Speaker 3: It could be too so they look but they're a

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Speaker 3: strategic partner for us. But they manufacture plate, very very

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Speaker 3: big in their wire products and also in roofing irons.

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Speaker 2: And coil product.

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Speaker 3: But they don't mean if no one in New Zealand

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Speaker 3: and manufacturing structural steel or hollows, so we need to

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Speaker 3: import that product.

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Speaker 4: Would you ever consider getting into manufacturing.

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Speaker 3: No, there the scale, just the economics don't stack up.

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Speaker 2: That don't stack up. You need to New Zealand.

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Speaker 3: While we punch above our weight in the global scheme

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Speaker 3: of things, if you look at the total supply of

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Speaker 3: steel into New Zealand, it's still quite small.

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Speaker 1: Economics of this investment, when are you expecting to break

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Speaker 1: even on it?

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Speaker 2: Oh, we're very comfortable with this building.

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Speaker 3: Look, we've come in to this on a this is

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Speaker 3: a design build lease. We've gone a twenty year term,

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Speaker 3: so we're a long term strategic partner. We could have

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Speaker 3: built this ourselves, but we've got other investment projects that

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Speaker 3: we're working on and we'd rather use that capital on

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Speaker 3: those areas.

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Speaker 2: So we're more than comfortable. We built this at the

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Speaker 2: right time.

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Speaker 3: We got in there just before the interest rates started

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Speaker 3: to increase, so we're very comfortable and we've got certainty

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Speaker 3: on the site for the next twenty years.

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Speaker 4: So look around.

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Speaker 1: Then, What would your message be to anyone wanting to

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Speaker 1: kick start a pet a big infrastructure project.

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Speaker 4: You guys are good to go.

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Speaker 3: Look, I think if you I think you've got to

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Speaker 3: look ahead, you've got to back yourself. I think you've

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Speaker 3: got to really look at where your strategic positions and

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Speaker 3: where you want to be the next five and ten

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Speaker 3: years for Asthmus, regardless of the ebbs and flows of

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Speaker 3: the market.

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Speaker 2: We need to do it.

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Speaker 3: Ourselves because we have already seen productivity gains. It's enabling

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Speaker 3: us to do what we need to do in Mount

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Speaker 3: Wellington and we've got the balance sheet to do it.

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Speaker 3: So we're going through quite an exciting time because Asthmus

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Speaker 3: has flyn under the radar for many, many years.

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Speaker 2: So our board and our.

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Speaker 3: Shareholders are very excited because this is one of several

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Speaker 3: investment projects which we're underway with which is great.

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Speaker 1: I wasn't going to ask you this, but you certainly

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Speaker 1: do fla under the radar as a business.

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Speaker 4: It's a real privilege to be here.

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Speaker 1: Lovely, why come on camera and show us around your warehouse.

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Speaker 3: Look, I think it's it's time that we do beat

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Speaker 3: the drum a little bit. I think, Look, we work

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Speaker 3: with some of New Zealand's biggest fabricators who are great customers,

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Speaker 3: some of the biggest civil infrastructure organizations in New Zealand,

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Speaker 3: and I think they want to see Asthmus out there

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Speaker 3: beating the drama.

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Speaker 2: A little bit as well. We've been around for a

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Speaker 2: long time.

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Speaker 3: I think there's not many companies which are what I

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Speaker 3: call New Zealand Inc.

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Speaker 2: That have been around for as long as we have.

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Speaker 3: With fifth generation getting involved in Asthmus now as far

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Speaker 3: as at a board level.

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Speaker 1: Fifth generation family, family business that's incredib absolutely yeah.

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Speaker 3: And they still as committed to the business and the

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Speaker 3: future of the business, so it's pretty exciting and the

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Speaker 3: future of the country by the lacks absolutely and for

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Speaker 3: me it's a privilege to be part of it. They

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Speaker 3: got a lot of support, a lot of autonomy and

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Speaker 3: here we're looking forward to what the next five to

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Speaker 3: ten years will bring for us. Well.

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Speaker 4: Thank you for having us really appreciate it.

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Speaker 2: Dan, thank you very much. Thank you for coming in