Resin manufacturer reports some of best results in its 54-year history as listed company
Investors who took a bold punt on resin manufacturer Nuplex Industries last March - as a banking crisis threatened to sink the company - have been rewarded with returns of more than 350 per cent.
Its shares have risen steadily over the past year and leaped a further 8c yesterday as Nuplex reported some of the best results in its 54-year history as a listed company.
The company reported an after-tax profit of $34.6 million for the final six months of last year from $6 million in the previous corresponding period.
Operating profit was up by 201 per cent to $35 million, while earnings before interest, taxation and depreciation (ebitda) were up by 58 per cent to $69.8 million.
Nuplex's products include solvent, water-and powder-based resins used in the paper, construction, paint and adhesive industries, as well as polyester resins and gelcoats used in the marine, swimming pool and construction industries.
The company - founded in Auckland in 1952 - has operations in North and South America, Asia, Australasia and Europe.
What makes the latest results remarkable is depth of the crisis Nuplex faced just 12 months ago.
Last February its shares dropped 35c in one day after the company announced it was in talks with bankers over its cash advance facility. The talks followed a half-year drop in profit of 76 per cent as demand declined as a result of the global financial crisis. They hit a 12-month low of 75c on February 23. Nuplex shares closed up 8c at $3.41 yesterday.
Managing director John Hirst said the results were a great achievement, and reflected successful execution of strategy and continued focus on business efficiency.
"At this time last year it was still a little bit hand in mouth in knowing that you had done all the work properly, but there was such a high degree of uncertainty almost from day to day."
Hirst said the company's long-term geographic and market sector diversification strategy was reflected in the latest results.
"Our significant exposure to China and Southeast Asia has provided growth, while most mature markets remain depressed."
Hirst said the company would focus on growing its business in Asia, particularly China, where automotive production - in which Nuplex products were used - was up by 50 per cent.
The company's exposure to Australia - one of the developed world's most resilient economies - accounted for 40 per cent of the group's business, he said.
Nuplex chairman Rob Aitken said the board was "delighted" with the rapid turnaround in the company's performance, despite continued trading difficulties in some markets.
"This strong profit and cash flow will enable the company to return to its normal pattern of dividend payments, and directors have declared an interim dividend of 10c per share, which represents 54 per cent of operating profit after tax."
Hirst said there were several challenges to the company's outlook, including continued weakness in United States and European markets, higher prices for raw materials and a recent strengthening of the US dollar.
"We anticipate that cash generation will remain strong," he said. "However, a combination of higher demand and increasing prices driven by raw material costs will require some reinvestment in working capital as revenue grows."
Forsyth Barr analyst John Cairns said that despite yesterday's solid result Nuplex's underlying business was volatile.
"There's questions as to whether we've just looked at an inventory build over this period, particularly in Europe, or whether this is an actual sustainable demand."
