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Nuplex, raising profit forecast, ponders move offshore, NZ asset review

Friday 6th November 2009

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Nuplex Industries, the specialty chemicals maker, raised its full-year earnings forecast as the Asian region leads a recovery in sales and the company benefits from lower raw material costs.

Earnings before interest, tax, depreciation and amortization may be $100 million to $110 million in 2010, up from a previous target of $100 million, managing director John Hirst told shareholders at their annual meeting today. Net operating profit may jump 48% to 78% to a range of $36 million to $44 million, helped by the benefits of lower debt levels.

“We have enjoyed a strong start to the current financial year,” Hirst said. “As markets recover and consumers gain confidence, all of the company’s products will find upwards pressure on demand – it is merely a question of time.”

The 2009 financial share marked a something of a watershed for Nuplex, which was forced to sell shares at a discount and renegotiate its funding lines as a resilient kiwi dollar stoked the value of overseas debt and demand dwindled. Following the refinancing, Nuplex’s gearing has fallen to less than 19% from 49% at June 30, 2008.

Shares of Nuplex climbed 5.4% to $7.95 on the NZX today.

The coming year marks the changing of the guard for the chemicals company, with Hirst stepping down after a life-long stint at Nuplex. Chief financial officer Graeme Storey retired in March and Fred Holland departed at last year’s AGM after 40 years with the company, including 12 as chairman.

Chairman Rob Aitken said Nuplex is now at a stage where relocation offshore is a possibility and the board is currently assessing the options.

“We are mindful that the corporate costs of an expanding global business are presently largely being carried by the New Zealand entity, in accordance with our current domicile and tax legislation,” Aitken said at the meeting.

“Unfortunately, these costs generally offset operating profits generated by New Zealand domiciled businesses, eroding the profit base with the consequence of zero or minimal New Zealand tax payments and hence an absence of imputation credits,” he said.The board is currently considering the merits of a move and will advise shareholders “in the near future,” he said.

Poor trading conditions in New Zealand are also prompting Nuplex to assess the scope of its local operations.

“We have extensive infrastructure in New Zealand which may well be in excess of what is required for the future,” Aitken said.

Hirst said the company will seek “niche acquisitions” in its resins business.

Businesswire.co.nz

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