Nuplex considers leaving NZ

Nuplex managing director John Hirst. Photo / Dean Purcell.

Resins and chemicals maker Nuplex says full year operating profit after tax could rise by up to 78 per cent, while it is also considering whether to remain based in this country.

Chairman Rob Aitken told the company's annual meeting today that global business conditions had improved markedly on a year ago.

Sales revenue in most markets appeared to have stabilised, although, except for Asia, at a much lower demand level than a year ago.

With lower raw material costs and benefits from restructuring in the past 12 to 18 months, net profits were strongly ahead of last year, so far, said Aitken.

"Stronger demand and lower costs from our Asian operations have led to a very strong performance from that region, with Asia now having doubled the corresponding last year-to-date profit and is now on a par with Australia as the largest regional profit contributor."

The poor state of trading in this country was a particular concern, he said.

It was partly caused by a relatively worse economic environment, but also due to moves by many traditional customers to lower cost operations offshore.

Nuplex had extensive infrastructure in this country that may be more than it needed in the future.

Managing director John Hirst said the first quarter had been stronger than expected, while October was "very profitable".

While full year results would depend on a range of factors, current indicators were that earnings before interest, tax, depreciation, and amortisation would be in the range of $100 million to $110m.

With low debt that would translate into an operating profit after tax of $36m to $44m, up by 48-78 per cent over last year.

Aitken also said the board was considering the matter of the company's domicile, with the matter having been raised by shareholders.

"We are mindful that the corporate costs of an expanding global business are presently largely being carried by the New Zealand entity, in accordance with our current domicile and tax legislation," Aitken said.

"Unfortunately, these costs generally offset operating profits generated by New Zealand domiciled businesses, eroding the profit base with the consequence of zero or minimal New Zealand tax payments, and hence an absence of imputation credits.

"Clearly, this is not in the best interests of the majority of our shareholders if it can be avoided."

The board expected to be able to decide in the near future whether the matter was worth further consideration. Ultimately it would be a decision for shareholders.

Last financial year Nuplex had to raise nearly $160m in new capital to meet debt commitments.

The company reported a 65.4 per cent fall in net profit for the year to the end of June to $16.7m as it was battered by tough economic conditions. Revenue fell 2.5 per cent to $1.49 billion.

Nuplex shares were up 10c to $2.50 in late morning trade.

- NZPA