Resin manufacturer Nuplex is warning of price rises for its products, despite a 481% increase in after-tax net profit.
The company has bounced back from the most difficult 12 months in its 54-year history with a record result for the six months ended December.
After-tax profit lifted from $6 million in the previous period to $34.6 million, with operating profit up 201.7% to $35.0 million and ebitda rising by 58.5% to $68.8 million.
That was slightly above the general consensus seen in analysts’ forecasts, although Nuplex had already foreshadowed the result by confirming last month that the figure would be “well above” the previous ebitda record of $60.6 million.
The company was last year forced to seek more capital from the market after the huge slump in demand for its products in late 2008 raised concerns about its debt profile.
But with a gearing ratio of just 16% at the end of 2009, the company has confirmed it will return to its normal pattern of dividend payments, with an interim dividend of 10 cents per share declared.
Group managing director John Hirst said the results - his final before he steps down after 40 years with the company - demonstrated the benefits of the company’s long-term geographic and market sector diversification strategy.
“Our significant exposure to China and South East Asia has provided growth, while most mature markets remain depressed. However, our significant exposure to Australia – one of the most resilient economies in the developed world and accounting for some 40% of the group’s business - has resulted in our returns from mature markets outperforming the global resins industry.”
China was highlighted as an area of particular growth, but the US provided little confidence that the recession was over, even with hope of a pick-up in construction and industrial manufacturing in the mid term.
Europe was also showing an “encouraging return to growth”, although manufacturing data from Germany over the past month and weak economies in the south of the continent suggested caution about a broad recovery.
But even with the turnaround in fortunes, factors outside the company’s control may force Nuplex to raise the prices of its resin products.
Nuplex managed to bring some of the margins that were “unacceptably low” into line with raw material prices remaining soft during the past six months, while the lower prices that flowed through to customers led to lower revenue in spite of a moderate increase in tonnes sold.
But the return in demand was also seeing a significant rise in raw material costs and Mr Hirst said the company was feeling the effect of these as its lower-cost inventories were sold.
“The recent strengthening of the US$ will also affect pricing in domestic currencies, requiring us to increase our prices, in some cases substantially. One of our challenges during the balance of this financial year will be to maintain margins as our costs increase.”
Thu, 25 Feb 2010