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Margins squeeze Nuplex result

By Phil Boeyen, ShareChat Business News Editor

Friday 23rd February 2001

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Resin and waste company Nuplex (NZSE: NPX) has posted a lower interim profit as its resins business finds margins hit by higher raw material costs.

The company's profit for the six months ended December was $8.7 million, dropping more than 4% from $9.1 million in the same period the previous year.

Resins account for more than three-quarters of the company's earnings, but it says margins in all markets are under severe pressure from higher raw material costs.

It says these costs are driven by a combination of oil prices, global demand growth for petrochemicals and weak local currencies.

Sales revenue of $206 million is 8% ahead of the previous year but most of the increase was a result of higher prices in the resins business due to partial recovery of raw material cost increases.

Nuplex says demand for resin in New Zealand has been patchy because of higher costs, and the company was also hit by lower demand in Australia.

"In the second quarter, demand was substantially lower than expectations with profit suffering through inadequate volume to spread fixed costs," says chairman Fred Holland.

However Mr Holland says the company achieved good growth in Vietnam, and its special waste business is beginning to show the benefits of restructuring.

"All operations in this business segment recorded improved performance. The acquisition of an Australian medical and quarantine waste business in January 2001 will continue to grow our Special Waste segment."

Mr Holland says although the company not be able to recover the ground already lost it expects to stabilise performance and finish close to last year's record profit result.

"The company is strongly placed to benefit from a demand recovery in the Australian market, while we continue to seek further opportunities for growth in the Asia Pacific region."

Nuplex says strong cash flow and confidence in the future has enabled the directors to declared a fully imputed interim dividend of 8 cents per share, the same as the previous year.

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