HALFYR: NPX: Half-Year Results Release

25 Feb 2010 10:38 am

NPX 25/02/2010 HALFYR

REL: 1038 HRS Nuplex Industries Limited

HALFYR: NPX: Half-Year Results Release

Nuplex Industries Limited Results announcement to the market

Reporting period 6 months to 31 December 2009 Previous reporting period 6 months to 31 December 2008

Amount (000s) Percentage change Revenue from ordinary activities $714,655 down 10% Profit from ordinary activities after tax attributable to security holder $35,029 up 202% Net profit attributable to security holders $34,631 up 481%

Interim/Final dividend Amount per security Imputed amount per security Interim 10 cents per share 0 cents per share

Record date 18 March, 2010 Dividend payment date 1 April, 2010 Dividend Reinvestment Plan to apply at discount of 15 cents per share

Comments Unusual losses after tax for the current year comprise:

NZD '000 Remediation provisions $398 Total unusual (gains)/losses after tax $398

ASX/NZX Media Release

25 February 2010

Nuplex delivers a record interim result EBITDA up 60% Operating profit up 200%

Nuplex Industries Limited, the international resins and specialties group, today announced an after-tax profit of NZ$34.6 million for the six months ended 31 December 2009 (pcp $6.0 million).

Operating profit, at NZ$35.0 million (pcp $11.6 million), and EBITDA at NZ$68.8 million (pcp $43.4 million), were records for any half year period in the group's 54 years as a listed company. Operating profit included abnormal costs of $0.4 million (pcp $5.6 million) and EBITDA included the impact of non-recurring items, principally restructuring costs, which had a negative impact of $6.4 million (pcp $0.9 million).

Operating cash flow was NZ$53.9 million (pcp $44.3 million), reflecting the strong profit and continuing tight cash management control, and this led to a net debt to net debt + equity ratio of 16% at 31 December 2009.

Dividend Mr Rob Aitken, chairman, said: 'The board is delighted with the rapid turnaround in the company's performance in achieving record results despite difficult trading conditions in many markets. This strong profit and cash flow will enable the company to return to its normal pattern of dividend payments, and directors have declared an interim dividend of 10 cents per share, which represents 54% of operating profit after tax.'

Dividends will be 80% franked for Australian shareholders, but will not carry any New Zealand imputation credits and shareholders residing outside New Zealand will not receive a supplementary dividend. The dividend will be paid on 1st April 2010 to shareholders on the register at 18th March 2010.

Shareholders will be offered the opportunity to participate in the dividend reinvestment plan. The strike price will be the weighted average sale price of all shares traded on the NZX during the period 8th to 12th of March 2010 less a discount of 15 cents per share.

Results summary for the year to 31 Dec 2008 (NZ$m) 31 Dec 2009 (NZ$m) Change (%) Sales revenue 795.1 714.6 -10% EBITDA 43.4 68.8 +59% EBIT 31.8 57.3 +80% Operating profit 11.6 35.0 +201% Net profit 6.0 34.6 +477% Earnings per share (cents) 19.4 18.2 -6% Interim dividend per share (cents) 0 10.0 * Due to the rights issue in April 2009 and the share consolidation in June 2009, H1 2009/10 eps and dividends are not comparable with 2008/9.

Mr John Hirst, group managing director, said: 'An all-time record half-year profit was a great achievement, reflecting successful execution of our strategy and continued focus on business efficiency. After a difficult but profitable year in 2008/09 - albeit a year in which Nuplex's result was the envy of most of the world's resin and chemical companies - business conditions have been somewhat more favourable and management actions have been particularly effective in optimising returns.

'This result demonstrates the benefits of the company's long-term geographic and market sector diversification strategy. Our significant exposure to China and South East Asia has provided growth, while most mature markets remain depressed. However, our significant exposure to Australia - one of the most resilient economies in the developed world and accounting for some 40% of the group's business - has resulted in our returns from mature markets outperforming the global resins industry.

'Importantly, our EBITDA to sales margin was 9.6% (pcp: 5.5 %).

'Gains were made on all fronts. Demand recovered somewhat for some business units; margins now reflect more traditional levels; fixed and variable cost reductions contributed substantially as did lower interest costs and reduced tax rates. We have largely held or grown market share, and new technologies have helped to strengthen market positions and enhance our reputation as an innovative company.'

Resins

31 Dec 2008 (NZ$m) 31 Dec 2009 (NZ$m) Change (%) Sales revenue 631.8 571.4 -10% EBITDA 32.5 58.4 +80%

The Resins business provides raw material inputs for the coating, composites, construction, adhesive, textile, printing ink and paper industries. The business supplies coating companies in 85 countries, while composite raw materials are supplied to customers throughout the Asia-Pacific region. This segment now includes Construction Products, which is a downstream user of Nuplex resins.

Prices of raw materials from both petrochemical and renewable resources remained soft throughout the period; these generally flowed through to our customers via lower selling prices, which led to lower revenue in spite of a moderate increase in tonnes sold. Some margins, which had become unacceptably low during previous periods of rapid cost escalation, were brought into line through this process.

Demand varied substantially across the regions, with Asia continuing to lead the way as the growth region. In mature markets, government stimulus packages helped to check the previous year's declines and stabilise and lift demand.

Sales by European operations improved on the back of increased exports, particularly to China and the Middle East, while domestic European demand gathered pace towards the end of the period. New technology helped to increase market share and retain business in key sectors, as regulations forced major downstream product reformulation to reduce solvent emissions. As would be expected, many of the products based on new technology provided superior margins.

There was significant restructuring to position the European business appropriately for the future. Variable and fixed costs were reduced substantially, and the Netherlands government's financial support continued to support the retention of skilled staff within the company through the downturn.

In the Americas, while there was no uplift in demand, margins improved as the product mix changed to include more specialty resins largely eliminating exposure to commodity segments. These higher margins offset loss of business as some customers with internal manufacturing capacity took production in-house. The benefits of the major restructuring in early calendar 2009 also contributed substantially.

China remained a success story for Nuplex. The 50+% annual growth in its automotive manufacturing industry created strong demand for high-end products, while all other industrial segments also continued to improve. New technologies and a deliberate shift in product positioning to specialty segments contributed to higher margins and a substantial performance improvement.

Throughout the ASEAN region, demand rebounded towards the end of the period to levels last seen in 2008. Performance was also helped by improvements in plant efficiency and growth in the composites segment. Earnings from Asian entities more than doubled year-on-year.

The result from Australasia was also excellent. In New Zealand, sales showed some recovery towards the end of the period, which was a welcome relief. Australia bounced back from a slow period late in 2008/09 and, with demand stronger in more sophisticated technology sectors, average margins improved, delivering a result very close to the highs of previous years. All resin segments improved their performance, although demand for Construction Products was constrained. Improved plant efficiencies, together with restructuring benefits, reduced costs materially.

Specialties

31 Dec 2008 (NZ$m) 31 Dec 2009 (NZ$m) Change (%) Sales revenue 163.3 143.2 -12% EBITDA 11.0 10.3 -6%

The Specialties business produces masterbatch and markets functional technical raw materials to the Australasian chemical, plastics, general industrial and life sciences sectors.

The market was constrained in most segments, and the agency and distribution operations' focus was on quality business and improved cash flow. Marginal sales were discontinued, with little impact on profit but improved cash flow. New agencies enabled a broader market spread and opportunities for future growth. Plastics were hit hard, due to lower demand for discretionary goods and supply interruptions from Europe and the Middle East.

Masterbatch operations were well managed in a tight market, using quality and service to improve their market position.

Outlook

Mr Hirst said: 'The second half of the financial year has started with overall sales following a similar pattern to the last quarter however there are mixed messages from different markets. China and the ASEAN countries are expected to continue to grow as a result of increased consumer demand and renewed domestic confidence. Monthly data from the US provides little confidence that the recession is over, yet there is hope of a pick-up in construction and industrial manufacturing in the mid term. Europe's recent demand pattern reflects an encouraging return to growth, although manufacturing data from Germany over the past month and weak economies in the south of the continent suggest caution about a broad recovery. The small recovery in New Zealand is welcome and there is an expectation that this will be sustained. There are few signs that the Australian economy will suffer any setback and segments that have not yet shown appreciable growth are expected soon to see increased activity.

'The higher demand is causing raw material costs to increase significantly, and we are feeling the effect of these as our lower-cost inventories are sold. The recent strengthening of the US$ will also affect pricing in domestic currencies, requiring us to increase our prices, in some cases substantially. One of our challenges during the balance of this financial year will be to maintain margins as our costs increase.

'We continue to improve manufacturing efficiency and believe there are still gains to be made in both variable and fixed costs. Success across a broad front with new high performance and low environmental impact technology, will help us to penetrate higher margin segments and protect existing market shares.

'We anticipate that cash generation will remain strong, however a combination of higher demand and increasing prices driven by raw material costs will require some reinvestment in working capital as revenue grows.

'With uncertainty about the direction of future demand, and the need to recover cost increases to maintain margins, it is difficult to give other than a broad view of the likely result for 2009/10. However, our operational efficiency, advanced technology and well controlled fixed costs, coupled with a conservative balance sheet, augur well for sound results for the balance of this financial year and beyond.'

Mr Aitken said: 'Following a strong start to the second half, we have lifted the bottom of our guidance range such that we expect EBITDA to be a record for the company and in the range of $125 - $135 million. Continuing satisfactory trading conditions, and lower interest and tax costs, can be expected to deliver earnings per share in the 30 - 36 cents range. While demand for capital expenditure and working capital will rise, good cash flow is expected and we remain confident of our ability to maintain dividends at an attractive level.'

Nuplex Industries Limited is a leading international manufacturer and distributor of resins for coatings and composites, and specialty products for the construction, chemical, plastic and life sciences industries. It has manufacturing operations in ten countries on four continents. Australia generates the largest share of earnings, followed by Asia and Europe. The company also earns significant contributions from the Americas and New Zealand. Nuplex is listed on the Australian and New Zealand exchanges and has a market capitalisation of A$490 million / NZ$630 million.

For further information, please contact: John Hirst, Nuplex Group Managing Director, +61 417 133 334

Media enquiries: Ashley Rambukwella, Financial & Corporate Relations, +612 8264 1004 / +61 407 231 282 Amanda West, Merlin Consulting, +649 585 1519 / +64 210 439 674

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