Nuplex sees 22% 2016 earnings boost on restructure, Asian growth, weak kiwi

Wednesday 4th November 2015

Nuplex Industries, whose resins are used in industrial coatings and paint, says annual earnings will rise by as much as 22 percent in 2016, benefitting from last year's restructure, accelerating growth in Asia, and a weaker kiwi dollar.

Operating earnings before interest, tax, depreciation and amortisation is forecast to be between $140 million and $155 million in the year ending June 30, up from $127 million a year earlier, chief executive Emery Severin told shareholders at today's annual meeting in Auckland. That guidance is based on Nuplex's Asian business delivering ebitda growth of 10 percent, an improved performance from the Australian and New Zealand unit after it was scaled back last year, and a weaker kiwi dollar against the greenback, he said.

Europe, the Middle East, Africa and the Americas provided largely steady markets.

Severin said demand was below expectations in Europe in recent months, largely caused by political uncertainty in Eastern Europe and the Middle East, though the region is still showing signs of growth after several years of stagnation.

"Nuplex expects this modest economic growth to support demand throughout the rest of the financial year," he said in speech notes published on the NZX. "However, the softer than expected start to our financial year will be evident in Nuplex EMEA's first half result."

The company overhauled its business last year, cutting back operations in New Zealand and Australia where a weaker performance was holding back gains in the rest of the world, and it's targeting rapid expansion across Asia where it has boosted production. Earlier this year, the company's executive team outlined plans to investors on growth aspirations, targeting a 64 percent gain in sales across Asia by 2018, and double-digit gains in ebitda in 2016 through to 2018 from Asian operations.

Severin said Asia is showing encouraging signs in China and Indonesia after a "volatile start to the year" and was on track to meet the double-digit earnings growth goal, while Australia and New Zealand was stable with construction and infrastructure underpinning demand for coatings and resin.

The Americas segment was flat with growth in automotive equipment manufacturing offset by dwindling demand in the resources sector, he said.

Chairman Peter Springford told shareholders the board recently visited the company's operations in Russia, which he acknowledged faces a higher investment risk owing to the geopolitical tensions and their economic impact on the Russian economy.

"Notwithstanding the risks, the board came away with the view that a 'first mover' advantage may be available in Russia today," Springford said. "We have encouraged management to come back to us with a fully developed plan to expand our activities there."

Severin has previously said Russia was a largely untapped market where Nuplex has invested about $10 million to chase growth, and flagged further investment was likely to be between $30 million and $40 million over the next couple of years.

Nuplex shares gained 1.9 percent to $4.32, and have gained 42 percent this year, outpacing the 3.6 percent increase in the S&P/NZX All Index over the same period.

BusinessDesk.co.nz

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