KEY POINTS:
Resins maker Nuplex Industries has reported a 78 per cent fall in first profit.
Today, it reported net after tax profit of $8.6 million for the six months ended December 31, compared with $40.1 million a year earlier, which included a gain of $24.4 million on an asset sale.
The company declared a dividend of 15.5 cents a share, from 14c a year ago.
Nuplex shares opened down 4c today at $7.
Operating profit for the half year was $16.8 million, unchanged from the first half of last financial year.
Unusual Costs of $6.8 million after tax arose primarily from restructuring activities in Britain and Brazil.
Chairman Fred Holland said the restructuring would contribute substantially to future profits.
Sales increased by 20 per cent to $723m, reflecting higher pricing and a business portfolio switch from environmental services to the PML Group.
Earnings before interest, tax, depreciation and amortisation (ebitda) increased by 4 per cent to $49m.
Returns from overseas operations improved but a requirement to write down hedging accounts, largely in this country, reduced ebitda by $2m.
The result was also affected by loss making operations of $5.2m ebitda, which would be eliminated in future years.
An effective tax rate of 55 per cent, resulting from an inability to utilise losses from Brazil and British operations, also had an impact on net profit.
With turnaround plans well advanced, it was anticipated a tax benefit from accumulated losses of $6.8 million should be available in future, Mr Holland said.
Mr Holland said that with continuing high crude oil prices and strong demand for petrochemicals, raw material costs and supply continued to dominate performance, with prices increasing some 10 per cent over the prior period.
Most operations successfully recovered the increases through pricing, but some lag inevitably impacted on margins, he said.
The sale of the environmental services business, a downturn in the demand for some products in the construction products segment, and the impact of foreign exchange adjustments, all combined to significantly reduce the contribution of New Zealand operations to group profit.
Australian demand was generally soft but improved results from specialty products, and an advantageous exchange rate, offset the those factors, Mr Holland said.
A 37 per cent lift in aggregate performance in the Americas, Europe and Asia, despite continuing losses in some operations, was a result of business and efficiency gains, underpinning the company's strategy of international expansion.
The PML speciality chemicals group suffered a bad debt with the failure of the Feltex Group.
Business conditions were expected to be similar in most regions to the first half although there were signs of strengthening in the European market, he said.
Raw material costs were expected to peak and retreat during the period with reasonable prospects of some margin recovery in the next few months.
Second half results were expected to be stronger than the first, with ebitda expectations for the full year remaining in the $103m to $110m range.
Resins continue to be Nuplex's core business contributing 82 per cent of group profit with operations outside historical New Zealand and Australian markets growing by 37 per cent over the prior year.
- NZPA
