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Nuplex warns about high exchange rates

Nuplex found overall trading conditions during the first quarter similar to the latter half of the 2010 year.Managing director Emery Severin told the company's annual meeting today that mixed signals continued to come from the global economy and the coati

NZPA
Wed, 03 Nov 2010

Nuplex found overall trading conditions during the first quarter similar to the latter half of the 2010 year.

Managing director Emery Severin told the company's annual meeting today that mixed signals continued to come from the global economy and the coating resins markets.

"Europe has held up well, however there are some signs of softening in the European auto sector, but we are actively offsetting this by product developments in other areas," said Dr Severin, who took over the top job in April.

"Volumes have softened in Southeast Asia and China, but indicators point to demand increasing, especially in the auto sector in China. Demand in the US and Australia has remained steady, while demand in New Zealand has been weak in line with the general economy and reflecting a very wet winter.

"We are wary of the historic high Australian and New Zealand exchange rates that may have an impact on the business."

Margins had generally held, Dr Severin said.

Nuplex's forecast for the 2011 financial year, based on average exchange rates in the first quarter, was earnings before interest, tax, depreciation and amortisation in the range of $135 million to $145m, with net profit in a range from $68m to $75m. In 2010 ebitda was $139.4m and net profit $64.2m.

Dr Severin said he was greatly impressed by the strength of the company's international footprint and its potential to grow into an even more significant global group.

"There is no doubt that Nuplex is in better shape than it was two years ago when the impact of the global financial crisis on the company began to be evident," Dr Severin said.

That had been a unique opportunity to restructure and reposition the group's operations, and the record profit in 2010 demonstrated the progress that had been made.

"While margins returned to more acceptable and historic levels in 2010, I believe we can do better and we strive to achieve margins comparable to the better performing global specialty chemicals companies," he said.

In the medium term the company was focused on growth in emerging markets as well as developing new products for customers in existing markets. It had set specific targets for new product renewal over a rolling 60-month timeframe.

Nuplex had committed to expanding its water-based resins capacity in Vietnam, and was seeking two new sites in China to support growth from its established positions in Guangdong province in the south and Jiangxi province in the east, where the company was constrained by either site or permit factors from further expansion.

Nuplex was also looking further afield in China as the country rapidly industrialised westward, as well as in India and Eastern Europe.

Chairman Rob Aitken noted that the percentage of Nuplex shares held outside this country had risen to nearly 25 percent from 20 percent last December, and said that if that overseas interest continued to grow the valuation gap between Nuplex and its global peers may narrow.

A review into changing Nuplex's domicile, while retaining listings on the NZX and ASX, had been going on for some years and was likely to go on for some time to come.

NZPA
Wed, 03 Nov 2010
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Nuplex warns about high exchange rates
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