Nuplex profit slashed by medical woes

By Phil Boeyen, ShareChat Business News Editor

Tuesday 25th September 2001

Nuplex (NZSE: NPX) has been forced to drastically cut its previously announced full-year profit by 90% following difficulties with a newly acquired Australian medical waste business.

Last month the company announced it had made a profit of $13.15 million for the year ended June but goodwill writedowns just announced will now slice that to $1.28 million.

The writedowns are being taken on the company's Australian medical and quarantine waste business, Medihold International, which it bought early this year for A$20.95 million.

In its year-end accounts Nuplex noted that Medihold had lost $895,000 since it was acquired due to higher than forecast costs but says since the results were announced the business had unsuccessfully tendered to retain a major contract with the New South Wales Public Hospitals.

"These factors have lead directors to conclude that the goodwill paid as part of the consideration for this business requires revaluation," Nuplex says.

"Taking a cautious view of future operating costs and loss of this contract, the directors have assessed the reduction in value of the goodwill paid for the business at 60%."

The reduction equates to a writedown of $11.87 million which will come off the preliminary bottom-line figure of $13.15 million.

Nuplex will still pay the final dividend of 7 cents per share and says that initiatives have been implemented to ensure the Medihold division is making a positive contribution to its environmental division.

"Nuplex believes that it can expand this business segment by applying its industry experience and in adapting new collection and treatment technology."

The company is also hopeful that a good start to the current trading year will make up for the Medihold mess.

"For the first two months, management accounts are reporting profits at similar levels to the very buoyant July and August of last year. Should this trend continue the company anticipates that the impact of the Medihold performance would be offset."

Comments from our readers

No comments yet