Nuplex posts 18% gain in full-year profit on lift in Asia, Europe resin margins

Nuplex Industries Chief Executive Emery Severin
Nuplex Industries 12-month price history (NZX.com)

Nuplex Industries [NZX: NPX], which twice lowered its earnings guidance, posted full-year profit growth of 18 percent as the chemicals manufacturer fattened its margin on coating resins in Asia and Europe.

Profit rose to $52.4 million in the 12 months ended June 30, from $44.5 million a year earlier, the Auckland-based company said in a statement. Sales rose 1.5 percent to $1.6 billion. Profit just topped analyst expectations in a Reuters survey of $52 million.

Nuplex had cited competition across its Australia and New Zealand businesses, when lowering guidance, saying margins had been squeezed in the region for both resins and specialty chemicals.In late 2012, the company embarked on a plan to reduce ANZ Resins capacity by 30 percent and in February this year it reorganised both ANZ Resins and Specialties to strip out costs and flatten its management structure.

Profit included $2.6 million of one-time items including a $7.5 million gain on the sale of its Quaker Chemical (Australasia) stake and an $8.8 million loss on the sale of its holding in RPC Pipe Systems, a venture known as Fibrelogic. Operating Ebitda for the year was $125.7 million, at the top of Nuplex's guidance range and just below 2013's $126.4 million.

"The performance of Europe and Asia over the past 12 months was pleasing and exceeded management expectations. However, the performance in Australia was much weaker than expected, due to increased pressure on margins in both the Resins and Specialties segments, particularly in the second half," said chief executive Emery Severin.

He gave a mixed picture of the outlook. No improvement was seen in ANZ, though the restructuring would help restore earnings, while steady growth is expected in Asia, helping to offset a rise in fixed costs as the company added capacity. For Europe, Middle East and Africa (EMEA), demand rose in the second half of 2014 and was expected to hold at those levels in coming months. In the Americas, Nuplex expects a continuation of modest growth.

In the latest year, ANZ Resins posted a 15 percent decline in sales and a 37 percent drop in operating earnings before interest, tax, depreciation and amortisation though that was more than made up for by earnings growth in Asia and Europe, Middle East and Africa. Total sales for Resins fell 0.2 percent to $1.35 billion in the latest year, while operating Ebitda climbed 11 percent to $111.5 million.

The company's Specialties division, which is made up of Nupplex Specialities and Nuplex Masterbatch, recorded a 7.1 percent decline in sales to $289.7 million, while operating Ebitda tumbled 44 percent to $14.2 million.

Capital spending was $42 million in 2014 as Nuplex invested in its Changshu and Suzhou sites in China, upgraded its Wacol site in Queenland, Australia, and invested in plant in Russia and Indonesia. For the 2015 year, capex is expected to fall to about $35 million.

Nuplex will pay a final dividend of 11 cents on Oct. 13, with a record date of Sept. 29, bringing payments for the year to 21 cents. Gearing rose to 31 percent as at June 30 from 26 percent a year earlier, reflecting investment in new capacity in Asia and an acquisition in Russia. The company tries to keep gearing within a range of 20 percent to 35 percent.

The shares last traded at $2.89 and have fallen 15 percent this year.

(BusinessDesk)

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