Nuplex looks to Russia and India to speed growth

Emery Severin, CEO of Nuplex Industries Ltd. Photo / Natalie Slade

Nuplex Industries is considering setting up manufacturing sites in India and Russia as the specialty chemicals maker pursues growth in emerging markets.

The Sydney-based company, listed on the NZX and ASX, announced its full-year result yesterday, beating its own guidance with net profit up 3.6 per cent at $66.5 million.

Sales rose 7.9 per cent to $1.57 billion in the 12 months to June 30.

Shares closed up 16c at $2.53 last night.

Nuplex chief executive Emery Severin said the company already exported coatings products from its plants in Thailand and Malaysia into India and Russia which were used in a range of industries including metal and automotive manufacturing.

"Those markets are starting to develop quite rapidly."

But Severin said Russian import tariffs on Nuplex products were high, which supported the argument for setting up a manufacturing facility in that country.

The logistics of operating a plant in India had to be carefully considered before an investment was made in establishing a presence on the subcontinent, he added.

"If you had [a plant] up in the northwest [of India] it would be extremely difficult to supply the southeast, which is different to China where the infrastructure is much better developed."

Nuplex is rapidly expanding its presence in Vietnam and China, as its plants in those countries are at full capacity.

A new factory in Changshu, China, is being designed, with first production expected during the second half of the 2013 financial year, the company said yesterday.

Nuplex already has two factories in China. One, in Foshan, opened in 2004, and another, in Suzhou, came as part of an acquisition in 2005.

The Changshu plant will double the company's Chinese production capacity and enable the manufacture of new products, including water-borne resins for the automotive industry.

"If we don't want to lose share of our key customers we're going to have to grow with them in emerging markets," said Severin.

"Other than doing strategic, bolt-on acquisitions in mature markets, the long-term growth is certainly in emerging markets."

He said yesterday's result was "solid", highlighting the strength and diversity of Nuplex's resins and Australasian specialties businesses.

"We were able to deliver earnings similar to the record result of 2010 despite rapidly rising raw material costs, weak Australasian economic conditions and a higher New Zealand dollar."

Severin said 90 per cent of higher raw material costs - which rose by an average of 13 per cent during the year - were recovered through price increases.

Craigs Investment Partners analyst Dennis Lee said Nuplex's full-year result was generally positive, given economic conditions, but the outlook for the firm was "full of uncertainty".