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Nuplex 1H profit drops 23% on Australasian weakness

Friday 24th February 2012

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Nuplex Industries posted a 23 percent decline in first-half profit, largely reflecting weaker resin sales in Australia and New Zealand and a rising kiwi dollar. The specialty chemicals maker kept its full-year guidance unchanged.

Profit fell to $24.1 million, or 12.3 cents a share, in the six months ended Dec. 31, from $31.1 million, or 16.1 cents, a year earlier, the company said in a statement today. Sales fell to $746 million from $761.5 million.

Nuplex first flagged the earnings decline in December, citing weaker global demand, although that didn’t deter the company from a buying spree in 2011 including the purchase of Viverso in Europe for 75 million euros and Acquos’ Masterbatch business in Australia for A$23.5 million.

Nuplex shares fell 1.1 percent to $2.62 after the results were released and have climbed 15 percent this year. It is rated ‘outperform’ based on the consensus of six recommendations compiled by Reuters.

"The stock is going to remain in its trading range - reaffirming the full-year guidance gives confidence for investors," said Grant Williamson, a director at Hamilton Hindin Greene. “The strength of the kiwi dollar doesn't help them."

The company will pay a first-half dividend of 10 cents a share, unchanged from a year earlier. The payment will be made on April 2 for shareholders on the register as at March 19. The full-year dividend is also likely to be unchanged.

Full-year earnings before interest, tax, depreciation and amortisation from operations, excluding Viverso and Masterbatch, is forecast to fall 5 percent to 10 percent, the company said. Including recent acquisitions and cost savings, EBITDA growth would be between no change and 5 percent in the full-year, it said.

In Nuplex’s resins division, its largest business, sales fell 2.8 percent to $595.5 million and EBITDA declined 10.5 percent to $46.9 million.

The biggest decline was for the Australasian region, its biggest source of revenue, where sales dropped 9.7 percent to $215.8 million and earnings declined 32 percent to $11.3 million.

It was able to garner fatter earnings from other regions. In Asia, sales rose just 0.7 percent to $127 million while earnings fell 13 percent to $12.9 million.

Europe, Middle East and Africa sales climbed 1.2 percent to $184 million and earnings rose 11 percent to $16.3 million, while in the Americas sales rose 4.2 percent to $68.6 million and earnings rose 2.4 percent to $6.5 million.

Its EBITDA to sales margin for resins narrowed to 7.9 percent from 8.6 percent.

In Australia, the company faced reduced demand from manufacturers and builders, and increased competition from imported products that were helped by a strong Australian dollar, it said.

New Zealand demand for decorative resins and adhesives was steady though exports were hurt by a high kiwi dollar. Continued earthquakes in Christchurch had delayed the expected pickup in demand from rebuilding the city, it said.

Nuplex’s specialties division posted 1.5 percent gain in revenue to $150.9 million, including a three-month contribution from Acquos, while EBITDA fell 18 percent to $10.4 million. The EBITDA/sales margin fell to 6.9 percent from 8.5 percent.

Specialities’ sales rose 5 percent in New Zealand but fell 10 percent in Australia, mainly on weaker demand from manufacturers.

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