Resins maker Nuplex is reviewing its future as a New Zealand domiciled company and may sell local infrastructure assets as trading conditions remain stubbornly tough in its home market.

Nuplex chairman Rob Aiken said the issue of the company’s domicile had been raised by shareholders recently and the board was considering whether a change was worth proposing.

“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,” Mr Aiken said in speech notes for today’s annual 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.

"Clearly, this is not in the best interests of the majority of our shareholders if it can be avoided.”

Nuplex, which has undergone a major recapitalisation of its balance sheet this year, is also reviewing its New Zealand infrastructure in light of continued poor trading.

Nuplex was suffering in New Zealand because of a relatively worse economic environment here but also because many of its traditional customers had moved to lower cost operations offshore.

“We may well remain as a supplier to these customers sourcing product from our Asian facilities in particular,” Mr Aiken said.

“Nevertheless, we have extensive infrastructure in NZ which may be in excess of what is required for the future. The situation remains under management review.”

Aside from the New Zealand and Asian markets Nuplex has experienced a stronger start to the current financial year. Lower raw material costs, stronger demand and the benefits of restructuring had resulted in better company performance in the current year, Mr Aiken said.

In August the company unveiled a profit of $16.7 million, down 65% on the previous year.

But earnings before interest, tax, depreciation and amortisisation (ebitda) was 5% ahead of guidance at $91.5 million.

Operating cash flow for the year was $123.2 million, well up on last year’s $76.7 million.

Managing director John Hirst, who announced his retirement from the company today, expressed confidence that this year would be better than the last.

"With a stronger than expected first quarter, and October also another very profitable month, we are becoming increasingly confident that we are likely to exceed budget," Mr Hirst said.
 
“The real question is by how much.”

The company has upgraded its earnings guidance slightly with ebitda for this financial year expected on current indications to be in the $100-$110 million range (previous guidance $100 million).

Having reduced debt to around $120 million, the company expects after tax operating profit of $36-$44 million, up by 48-78% over last year.