KEY POINTS:
The high dollar and a $2 million bad debt have helped drag down profits for resins manufacturer Nuplex.
Nuplex management warned yesterday that operating profit for the year was expected to be at the bottom or slightly below the previously forecast range of $103 million to $110 million.
Managing director John Hirst said he was confident the company's growth plans were on track but that "given the fact that two or three things have gone against us" it was prudent to update the market. Those negative factors included delays in the closure of plants in Brazil and Australia.
The closure of the Brazil plant had been flagged already although had taken longer than expected and incurred an additional $1 million in costs above and beyond the $2.5 million already written down in the last half-year result.
The Australian plant would now close at the end of the month but would also incur extra operating costs.
Hirst said those moves were part of a planned restructuring programme and, while the delays and extra costs were unfortunate, they were just part of the process.
But the collapse of a French automotive company which had left Nuplex with $2 million of bad debt had really come out of the blue.
"We've been through this with a fine toothcomb and there was not one sign that they were in trouble. They were paying their accounts exactly on time and had been doing so for years," he said. "Then, all of a sudden, they ring up and say they are going into voluntary administration."
Management had done everything it could.
The exchange rate was also having some negative impact on earnings.
Hirst remained confident about the long-term prospects of the business.
"Everything that we have planned to do that is going to give us a kick along, we've done," he said. "So I'm advising the market that things are still looking pretty good for next year."
He expected the restructuring to deliver a substantial lift in profit for the 2008 year.
Nuplex shares closed down 15c yesterday at $7.15.
