Australia puts squeeze on Nuplex
Industrial chemicals and resins manufacturer Nuplex has turned in what it calls a "disappointing" annual result, but investors have regained some confidence.
The NZX-listed firm's net profit for the year to June 30 jumped 18 per cent to $52.4 million.
However, that was influenced by several one-off items, including the sale of an investment in the Quaker Chemical joint venture and reduced provisioning for the Fibrelogic joint venture.
When adjusted for the significant items, the company's profit was $55m, down 3.1 per cent.
Nuplex chief executive Emery Severin said it was "disappointing" that operating profit of $125.7m was also down slightly from last year's $126.4m, as it had been expected to grow year on year.
Returns were not at the level the company would like them to be, Severin said.
Nuplex downgraded its profit guidance twice in the lead-up to the result announcement.
Following this morning's announcement, Nuplex's share price recovered 7.3 per cent to $3.10, a four-week high.
Severin said Nuplex's ability to deliver flat earnings in recent years, despite the significant decline in Australia and a strong New Zealand dollar, was due to its success in Europe and Asia.
Those regions account for about 70 per cent of the group's profits, compared to just 15 per cent in Australia and New Zealand.
Weak performance in Australia due to increased pressure on margins had led to a restructuring to reduce overheads, which cost $5.8m to execute over the year.
Severin said the company was not counting on market conditions improving in the near future.
However, the restructure was complete and was expected to deliver $5.6m worth of net benefits in the coming financial year.
"Restructuring the business should help turn around the earnings performance and drive an improvement in returns," he said.
"However, further work is still required to achieve acceptable returns in this region."
A key plank in Nuplex's growth strategy was increasing its capacity in Asia, which continued to experience steady growth, Severin said.
The company was on track to commission a third site in China and additional capacity in Indonesia by the end of the 2014 calendar year.
The benefits of the five-year investment programme were expected to flow through in the 2016 financial year, he said.
In the Americas, Severin said the company expected modest growth to continue.
Nuplex maintained its final dividend at 11 cents per share, bringing its full-year dividend to 21c, the same as the last three years.