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Nuplex FY profit drops 31 percent on weak ANZ, EMEA markets, writedowns

Thursday 15th August 2013

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Nuplex Industries, which had cut its earnings guidance three times, posted a 31 percent drop in full-year profit on weaker earnings from its resins division in the ANZ and EMEA regions and one-time charges. The specialty chemicals company expects to lift earnings in 2014.

Net profit fell to $42.9 million, or 21.7 cents a share, from $62.5 million, or 31.8 cents, a year earlier, the Auckland-based company said in a statement. Sales rose 3 percent to $1.66 billion. Profit lagged behind First NZ Capital's $44.4 million forecast though unchanged dividends for the year of 21 cents a share were expected.

Nuplex cut its guidance for a third time in May, citing a slump in Australian manufacturing which trimmed demand for resins, specialty chemicals and plastic additives. Its guidance today is that the Australian market will remain flat while its home market of New Zealand will "show some modest growth."

Earnings before interest, tax, depreciation and amortisation fell 3.5 percent to $126 million, in line with its May guidance of $124 million to $129 million. The company expects to beat that in 2014, it said. Net debt fell to $198 million as at June 30, from $220 million a year earlier and gearing fell to 26 percent from 28 percent.

"Looking ahead to the 2014 financial year, consistent with what we have seen in recent months, we are expecting flat trading conditions in Australia and Europe, modest growth in New Zealand and the Americas and steady growth in Asia," chief executive Emery Severin said in the statement.

Nuplex shares rose 2.6 percent to $3.15 in early trading on the NZX. The stock has slipped 1.3 percent this year, underperforming an 11 percent gain in the NZX 50 Index. It is rated a 'hold' based on a Reuters survey of six analysts with a median price target of $3.15.

The company embarked on restructuring of its ANZ manufacturing network last September and today reported a $5.6 million after tax writedown of obsolete equipment and a $5.5 million charge to writedown its investment in Fibrelogic Pipe Systems, acquired in 2011 for A$26 million.

All up, significant items after tax amounted to $13.8 million, up from $3.6 million a year earlier.

In its biggest division of resins, total volumes sold climbed 8.1 percent in the latest year, helped by a full-year contribution from Viverso (now renamed Nuplex Germany) and gains in the Americas and Asia. Volumes fell in ANZ and its Europe Middle East Africa (EMEA) region. Sales overall for resins rose 3.2 percent to $1.35 billion and EBITDA fell 8.5 percent to $100.9 million.

Resins are a key ingredient in paints and other coatings.

Resin sales fell 13 percent to $349 million in ANZ and EBITDA slumped 70 percent to $5.9 percent including restructuring costs. Asian sales rose 9.2 percent to $279 million and EBITDA rose 11 percent to $29.4 million.

Existing EMEA sales fell 6.2 percent to $363 million and EBITDA dropped 21 percent to $30.4 million, while Viverso sales soared 84 percent to $204 million compared to just a six month contribution in 2012. Viverso EBITDA gained 55 percent to $14.6 million.

The Americas contributed an 8.7 percent increase in sales to $156.8 million and EBITDA was up about 29 percent to$20.6 million.

The Specialties division, which includes Nuplex Specialties and Nuplex Masterbatch, posted a 2.2 percent gain in sales to $311.8 million and a 23 percent gain in EBITDA to $25.5 million.

Nuplex Specialities is a distributor of products to the plastics, good, nutrition, pharmaceutical, healthcare, mining and farm sectors and Masterbatch makes colour and performance additives for the plastics industry in Australia and New Zealand.

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