Nuplex aims to climb NZSE top 40 rankings

By NZPA

Tuesday 20th August 2002

Australasian industrial chemical supplier Nuplex has high hopes for the future, saying it aspires to be climb higher within New Zealand's top 40 and Australia's top 200 companies.

The chemicals, building material and waste management company is to announce its annual result on Thursday, and will also give an indication of how its recent purchase of Australian chemical company APS will add to its value.

Nuplex has almost mopped up all the shares in APS, or Asia Pacific Specialty Chemicals, after mounting a $A47 million ($NZ57 million) takeover battle three months ago.

The initial offer at A70c faltered , but shareholders capitulated after the bid was raised to A74c, which Nuplex said was still comfortably below APS' net tangible asset backing of A82c.

Strategically, Nuplex hopes the purchase will make it Australasia's largest manufacturer of resins for coatings, adhesives, composites and paper.

For APS, it is likely to mean redundancies for some of its 361 staff and the possible sale of non-core businesses as Nuplex strips out duplication between the two companies.

Nuplex managing director John Hirst says APS does not hold major market shares in the food nutrition and resins markets, so there's plenty of room for growth.

"We are of the view that if we are going to continue to be competitive as manufacturers in Australia and New Zealand then we have to be of sufficient size to be able to use mass to give us advantages in productivity.

"So part of the strategy of the acquisition of APS was to increase the mass of those particular businesses and hence, ensure that into the future they would remain competitive where we have a manufacturing base."

APS also offers Nuplex access to chemical-based businesses it doesn't have a finger in, but the company says the manufacturing and compliance processes are not completely outside its realm of experience.

Nuplex itself started out in the New Zealand flooring business in 1956, then got involved in other building materials and resins in the 1960s. In recent years it has adopted a two-pronged growth strategy through acquisition and growing market share, especially as the Australasian resins market is already a mature one.

It offers waste management services for both medical and environmental waste in New Zealand and Melbourne, and has several chemical plants on both sides of the Tasman and in Vietnam.

With a market value of $185 million, Nuplex is coy about saying how much APS will add to its worth. But it does expect the purchase will be positive to its earnings per share, and has said that the "targeted $210 million addition to Nuplex group sales appears achievable".

Mr Hirst admits Nuplex was very careful about its purchase of APS after an embarrassing write-down in an Australian investment last year.

Medihold, which was purchased for $A20.95 million , proved to be a costly mistake when it soon became apparent after the deal that the new addition was not going to make its earnings forecasts.

It then lost the tender to renew its major waste contract with New South Wales public hospitals. Nuplex was forced to make an $11.9 million write-down of Medihold's value, which meant revising its June year net profit down to $1.3 million, compared with $16.7 million a year earlier.

Asked whether Medihold had made the company think twice about shopping in Australia, Mr Hirst said the Nuplex board had been "incredibly conservative" with APS, with the result that the purchase had cost more in consultants' fees than most.

Mr Hirst said he had not been involved in the Medihold buy-up, and indicated that he felt much more comfortable dealing with a resins company.

"I've been with the company for 35 years.... I've acquired two businesses from Dulux, including Dulux Resins... I'm comfortable with the acquisition of APS."

Nuplex has obviously far from satisfied its hunger for acquisitions, but Mr Hirst is not giving much away, except to say that APS will add to its management experience with Asian markets.

"We still believe that there's a lot of merit in Nuplex for getting bigger. We're fully listed in both New Zealand and Australia. I guess we would have a view that we would like to lift our profile to be well inside the NZSE Top 40 and the ASX-200 and to do that well we're going to have to make some further moves."

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