Warning lops 70c from Nuplex shares

Nuplex managing director John Hirst said higher prices for resin and specialty products offset cost increases. Picture / Kenny Rodger

Nuplex shares took a 70c plunge yesterday after the company warned that demand for its resins was falling in Australasia and reduced its full-year forecast.

A much bigger company since taking over Coatings Resins from international pharmaceuticals and chemicals giant Akzo Nobel last month, Nuplex Industries yesterday disclosed a 5 per cent increase in its half-year net profit to $16.2 million.

But chairman Fred Holland said rising costs, the stronger currency and reduced demand were affecting earnings.

"Early indications are that second-half business here and Australia will soften in some areas," he said.

The company was expecting a full-year net profit of between $32 million and $35 million.

That is up on last year's $28.4 million, but less than the $35.8 million forecast in a survey of six analysts by Thomson Financial.

Nuplex said earnings from its $136 million acquisition of Coatings Resins would flow through to profits in the next half, but gave no indication as to how much it would add.

Nuplex is Australasia's largest producer of resins - synthetic compounds used in products such as paints, printing inks, adhesives and fibreglass.

The company's share price closed down 70c at $5.50 last night - their biggest slide since October 1997.

They have gone from $4.45 a year ago, fetching as high as $6.20 this year.

Macquarie Equities NZ investment director Arthur Lim was surprised by the extent of the fall.

"It appears investors are concerned about the softening."

Holland described the half-year result as "excellent" in view of "global raw material cost increases of a magnitude not seen for 30 years".

Prices of its major raw material imports had risen an average of 30 per cent towards the end of the half, and might increase further before coming down again later in the year.

Managing director John Hirst said the good news was that these costs had largely been recovered through higher average selling prices in the dominant resin and specialty products divisions, which had helped lift revenue $16.6 million above the same time last year.

The fully tax-paid 12c dividend was $9.2 million or 57 per cent of net profit for the half.

"With strong cash flow, directors expect to be able to at least maintain dividends at 2004 levels," said Holland. Coatings Resins had strengthened the company's balance sheet.

Total assets almost doubled from $446.8 million last year to $835.6 million.