Nuplex earnings to rise on back of restructure

Nuplex Industries [NZX: NPX] says annual earnings will rise by as much as 22% in 2016, benefitting from last year's restructure, accelerating growth in Asia, and a weaker kiwi dollar.

Operating earnings before interest, tax, depreciation and amortisation is forecast to be between $140 million and $155 million in the year ending June 30, up from $127 million a year earlier, chief executive Emery Severin told shareholders at today's annual meeting in Auckland.

That guidance is based on Nuplex's Asian business delivering ebitda growth of 10%, an improved performance from the Australian and New Zealand unit after it was scaled back last year, and a weaker kiwi dollar against the greenback, he says.

Europe, the Middle East, Africa and the Americas provided largely steady markets.

Mr Severin says demand was below expectations in Europe in recent months, largely caused by political uncertainty in Eastern Europe and the Middle East, though the region is still showing signs of growth after several years of stagnation.

"Nuplex expects this modest economic growth to support demand throughout the rest of the financial year," he says. "However, the softer than expected start to our financial year will be evident in Nuplex EMEA's first half result."

The company overhauled its business last year, cutting back operations in New Zealand and Australia where a weaker performance was holding back gains in the rest of the world. It is targeting rapid expansion across Asia where it has boosted production.

Earlier this year, the company's executive team outlined plans to investors on growth aspirations, targeting a 64% gain in sales across Asia by 2018, and double-digit gains in ebitda in 2016 through to 2018 from Asian operations.

Mr Severin says Asia is showing encouraging signs in China and Indonesia after a "volatile start to the year" and is on track to meet the double-digit earnings growth goal, while Australia and New Zealand is stable with construction and infrastructure underpinning demand for coatings and resin.

The Americas segment is flat with growth in automotive equipment manufacturing offset by dwindling demand in the resources sector, he says.

Chairman Peter Springford told shareholders the board recently visited the company's operations in Russia, which he acknowledged faces a higher investment risk owing to the geopolitical tensions and their economic impact on the Russian economy.

"Notwithstanding the risks, the board came away with the view that a 'first mover' advantage may be available in Russia today," Mr Springford says. "We have encouraged management to come back to us with a fully developed plan to expand our activities there."

Mr Severin has previously said Russia is a largely untapped market where Nuplex has invested about $10 million to chase growth, and flagged further investment is likely to be between $30 million and $40 million over the next couple of years.

Nuplex shares gained 1.9% to $4.32, and have gained 42% this year, outpacing the 3.6% increase in the S&P/NZX All Index over the same period.

(BusinessDesk)

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