Nuplex meets guidance with stalled full-year earnings growth

BUSINESSDESK: Nuplex Industries’ full-year earnings growth stalled, meeting its guidance, as the contribution from newly acquired Viverso and improved resin margins made up for falling volumes and the impact of a high kiwi dollar.

The stock climbed on the news.

The specialty chemicals company reported earnings before interest, tax, depreciation and amortisation of $131 million in the 12 months ended June 30, little changed from a year earlier.

Net profit fell 6% to $62.5 million as sales rose 2.6% to $1.6 billion.

"Investors sold down in preparation of the result – there is a bit of a relief rally going on," said Bryon Burke, head dealer at Craigs Investment Partners.

"There is no reason why the price shouldn't stay in positive territory."

Nuplex ramped up its gearing in the latest year to 28% from 12% as it debt funded the acquisition of German resin maker Viverso and the Masterbatch operations of Acquos in Australia.

Viverso contributed six months of ebitda in the latest year amounting to $10.4 million, which exceeded Nuplex’s estimate.

“To deliver earnings in line with the prior year is a credible result considering the softer market conditions experienced in Asia and Europe and the particularly tough trading conditions faced in Australia and New Zealand,” chief executive Emery Severin says.

Excluding Viverso, ebitda fell 8% in the latest year.

Nuplex didn’t give explicit guidance for the 2013 year, saying earnings would benefit from its two-year NuLeap review of its businesses, full-year contribution from Viverso, new capacity in Vietnam and an estimated $A5 million contribution from Masterbatch in Australia.

The shares rose 1.9% to $2.72, heading for the highest close in more than three months. The stock is rated a "hold" based on five recommendations compiled by Reuters, with a price target of $2.50.

Reported profit beat the $59.6 million forecast of Forsyth Barr analyst John Cairns. Nuplex will pay a final dividend of 11 cents a share, unchanged from the previous year.

The NuLeap programme $14 million in incremental benefits, beating the company’s $10 million estimate.

"We has a strong second half as a result of improved unit margins in our global resin segment, the delivery of greater than expected NuLeap benefits and the first six months earnings contribution from Viverso," Severin says.

"Combined these factors offset the impact of lower volumes in our global resin segment and the stronger New Zealand dollar."