Daily ShareChat: Nuplex

Nuplex produced a solid result ahead of expectations, says John Cairns, an analyst at Forsyth Barr.

Nuplex reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $139.4 million for the year ended June compared with Cairns' forecast of $131.4 million.

"The 2010 result benefited from the extensive restructuring initiatives from the previous year focusing on productivity and the reduction of operational costs," he says.

The company's sales volumes of manufactured resins were up 11% on 2009 and earnings in local currencies were higher in all regions.

Net debt at June 30 of $72.4 million, including $52.5 million of capital notes, gave Nuplex a 12% gearing ratio.

"The Nuplex strategy in the current environment is on sustaining and improving margin," Cairns says.

"This is being achieved through targeting higher value resins incorporating proprietary technology in consultation with customers."

But while 2010 resins volumes recovered from the depressed 2009 levels, they were still below 2008 levels.

"The rate of growth in Chinese resin demand is slowing but is now growing at a more sustainable rate," he says.

Nuplex is encountering capacity constraint in Asia and is planning capacity upgrades.

Cairns is forecasting Nuplex's EBITDA in the year ending June 2011 will be little changed from 2010 at $139.7 million, although that's up from his previous $129 million forecast.

Recommendation: Accumulate.

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