Nuplex posts 76% drop in profit

Thursday 26th February 2009

Nuplex Industries, the specialty chemicals maker that's in talks with its banks to loosen its loan terms, posted a 76% drop in first-half profit amid waning global demand.

Net income fell to $5.9 million in the six months ended December 31, from $24.6 million a year earlier, the company said in a statement. Shares of the company tumbled 14% to a 17-year low of $1.15 after the announcement, which included the suspension of dividends to focus on debt repayment.

"This has been the most difficult period in the company's history, with a drop in global demand at a rate and to an extent we have never seen before," managing director John Hirst said. Cash generation is the company's "principal focus," while Nuplex seeks to cut operating costs and keep a lid on capital spending.

Nuplex shares have slumped 62% this year, extending their decline after the company's February 19 statement that it was in talks with its banks because of a breach of its covenant to keep its senior debt cover ratio to EBITDA at three times. As at December 31, the company didn't comply, it said.

The banks had indicated "a willingness to either amend the covenant or give a waiver from compliance" though as of today agreement hadn't been reached, it said.

Shares of companies with high debt levels and exposure to global markets have been pounded this year in the face of the global downturn. Fisher & Paykel Appliances, with sales in the US, Europe and the Asia Pacific, has slumped 63%.

The first-half results included one-time costs of $5.6 million.

By Jonathan Underhill

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