Nuplex plans share buy-back, half-year jumps on abnormals

Thursday 19th February 2015

Nuplex Industries, the specialty chemicals maker, more than tripled first half earnings after it profited from the sale of two non-core businesses and because the year earlier period included significant one time costs.

Net profit jumped to $37.3 million, or 18.8 cents per share, in the six months ended Dec. 31, from $11.4 million, or 5.8 cps, in the year earlier period, the Auckland based company said in a statement. The latest period included profit of $13.8 million from the sale of its Nuplex Specialties and Masterbatch units and a related one time remediation cost of $3.4 million, while the year earlier period included a $14.6 million one time expense, it said.

Nuplex is cutting back its operations in Australia and New Zealand, where a weaker performance is weighing on growth in Asia, America and Europe. The company reiterated its forecast for annual earnings growth this year as Asia and North America grow at rates consistent with the first half, Europe remains steady and it improves margins in Australia and New Zealand amid flat demand.

"Europe, America and Asia delivered strong results, and whilst Australia/New Zealand is still in turnaround mode, it was good to see the recent restructuring initiatives moving the financial performance of the region in the right direction," said chief executive Emery Severin.

Shares in Nuplex rose 3.7 percent to a month high of $3.11.

Nuplex used the cash from its sale of its two Australasian units to reduce net debt to $122.6 million at Dec. 31, from $231.7 million at June 30. Its gearing, which measures net debt to net debt plus equity, dropped to 18.7 percent from 31.1 percent over the period.

The company's improved balance sheet is prompting it to undertake a share buy back of as much as 5 percent of its issued capital. It expects to detail the plans in coming weeks once it has completed consultation with regulators.

Nuplex is assessing plans for further growth initiatives in emerging markets, increasing investment in research and development and product development, identifying value creating investment opportunities and capital management. It expects to update shareholders on its plans following a review at the end of the June 2015 quarter.

In the first half, its European, Middle East and Africa unit increased earnings before interest, tax, depreciation and amortisation by 33 percent to $27.2 million as volumes rose 12 percent due to continued improvement in the European automotive industry and as it gained market share in flooring resins.

The company's Asian unit posted a 5 percent gain in Ebitda to $18.3 million as steady growth in South East Asia offset lower growth in China. Volumes increased 5.2 percent, reflecting higher capacity in Vietnam.

Steady growth in the Americas boosted Ebitda 13 percent to $10.4 million.

In its Australasian segment, Ebitda fell 68 percent to $3 million as lower margins in the Australian coating resins business weighed on the unit.

"Margins were impacted by the continuation of the intense pressure that had become evident in the second half of the prior financial year due to excess industry capacity and intense competition," Severin said. "Positively for Australia and New Zealand, both volumes and earnings were up when compared with the second half of the prior financial year."

Australasian margins also improved towards the end of the first half, he said.

In Nuplex's continuing operations, its Ebitda sales margin in the first half improved to 7.9 percent from 7.4 percent in the year earlier period.

The company reiterated its forecast for annual Ebitda from continuing operations to be between $109 million to $119 million. Including a five month contribution from its divested Nuplex Specialties and Masterbatch units, Ebitda will be between $115 million and $125 million.

The company will pay a dividend of 10 cents per share on April 2, unchanged from the year earlier period.

BusinessDesk.co.nz

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