By Jenny Ruth
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Wednesday 10th March 2010 |
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Resins company Nuplex's first-half earnings before interest, tax, depreciation and amortisation (EBITDA) of $68.8 million was ahead of his $64 million forecast, says Forsyth Barr analyst John Cairns.
The 10 cents a share first-half dividend was also ahead of the 7 cents he expected.
He has raised his forecast for full-year EBITDA by 4.1% to $131.4 million and raised his valuation from $3.26 a share to $3.61.
The company is expecting raw material costs to rise significantly and while it may recover some costs, a contraction in operating margin appears inevitable, Cairns says.
He says during the first half, resins demand varied with Asia the stand-out performer and European operations were boosted by increased exports to China. However, local European demand remained subdued and North American demand remained soft. Nuplex is focused on moving out of commodity resins into specialty resins, Cairns says.
Australian demand was resilient and there were signs of recovery in New Zealand towards the end of the first half.
Nuplex has raised its profit guidance three times since early November. "Whilst the upgrades are encouraging, the frequency of the upgrades highlights the uncertainty over market conditions, in particular the sustainability of underlying global resin demand and the impact of higher raw material input prices," Cairns says.
BROKER CALL: Forsyth Barr rate Nuplex as hold.
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