Nuplex keeps close eye on Medihold

By Phil Boeyen, ShareChat Business News Editor

Friday 2nd November 2001

Nuplex Industries (NZSE: NPX) has reassured shareholders over its troubling Australian medical waste business, Medihold, and announced that the rest of the company is running to budget in the first quarter of the new financial year.

In September Nuplex wrote down its Medihold acquisition in Australia by $11.9 million after it lost a lucrative contract with the New South Wales Public Hospitals, and in recognition that costs were running higher than anticipated.

Chairman, Fred Holland, told shareholders at the AGM on Friday that although Medihold's revenue has been in line with pre-purchase expectations, costs have not.

"It has become quite clear that the financial data we received did not reflect the ongoing costs of the business on an annual basis and we failed to pick this up during due diligence.

"As in all such situations, the reason why there were differences is a complex issue. I do not intend to expand on this matter beyond assuring you that management understands these differences and the board believes their response has been appropriate and that all issues are in hand, and some resolved."

Mr Holland says control of the business is now in the hands of the manager of the Australian Special Waste operation based in Victoria who has previously demonstrated the ability to turn around this type of business in Australian conditions.

He says a number of changes to system processes have been made and cost minimisation controls are in place.

"Infection control specialists are quickly recognising the impact of sharps technology on injury elimination within hospitals and related services. As a result, acceptance is increasing throughout Australia and New Zealand and future growth prospects look good."

"It is our expectation that the Australian medical waste business will be in a stable position within this financial year and will be a platform to build a broader environmental business over the next few years."

Elsewhere in the company Mr Holland says international petrochemical and oil prices have reduced and although local currencies remain soft, there's much less pressure on margins from raw material costs.

"Our major business segments in New Zealand and Australia servicing the paint, construction, fibreglass and paper industries are performing solidly in a market that is subject to the uncertainties of which you will all be aware.

"Our first quarter performance is in line with our budget and indications suggest October is showing a similar pattern with a return to improved profits. EBITDA is expected to be some 5% ahead of
last year"

Nuplex says it does expect any substantial downturn as a result of the events of September 11th but admits that any uplift to previous levels of consumption will more than likely be delayed.

Earlier this week the company lost one of its major shareholders, California-based Shamrock Holdings, which divested its 16.2% stake in the company to a range of domestic and international institutions as well as retail investors.

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