Nuplex won't meet profit forecasts; shares tumble

Monday 2nd February 2009

Nuplex Industries Ltd., the nation's biggest maker of specialty resins and chemicals, said a drop in demand in Europe and one-time costs mean earnings won't be its November forecasts.

Earnings before interest, tax, depreciation and amortization are expected to be NZ$42.5 million, with a similar result for the second half of the year, the company said in a statement. In November, Nuplex forecast first-half earnings of NZ$45 million to NZ$50 million, rising to NZ$60 million in the second half.

"Operations continue to be impacted by volatile trading conditions," managing director John Hirst said.

Shares of the Auckland-based company fell 7.3% to NZ$2.67 on the announcement, while the NZX 50 Index slipped just 0.1%. Nuplex is scheduled to release its first-half results on Feb. 26. Earnings will include restructuring and other one-time costs of NZ$2.1m plus NZ$3.2 million in provisions for bad debts.

Europe's economy has sunk into recession, in a synchronized downturn with the U.S. and Japan, forcing the European Central Bank to slash interest rates to try to revive growth.

Demand in the region "fell substantially" as customer reduced inventory.

"Market conditions worldwide remain generally soft with the worst affected sectors being those exposed to high levels of discretionary spending, such as new automobile production and the leisure segments of the composites industry, including boats and swimming pools," Hirst said.

Nuplex is conserving cash and minimizing costs. Demand in Europe is expected to revive in the second half while in other regions, demand will be similar to first-half 2009, he said.

The full benefits of the company's restructuring are likely to show up in 2010, he said.

By Jonathan Underhill

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