UPDATED: Nuplex shares jump 6.7% on positive outlook for earnings

UPDATED: Nuplex Industries [NZX: NPX] shares jumped 6.7 percent to a three-month high after the specialty chemicals maker confirmed it expects to meet its annual earnings forecast as it benefits from a reorganisation of its business.

The company's shares rose 20 cents to $3.20, making the stock the biggest gainer on the benchmark NZX 50 Index today. The Auckland-based company posted a higher first-half profit and reiterated its forecast for annual earnings before interest, tax, depreciation and amortisation from continuing operations to be between $109 million to $119 million.

Nuplex has been cutting back its operations in Australia and New Zealand, where a weaker performance is weighing on growth in Asia, America and Europe. In November it sold its Australasian agency and distribution business Nuplex Specialties and its plastic additives business Nuplex Masterbatch for A$127.5 million as it focuses on its global resins business. It used the sale proceeds to reduce debt and plans to buy back as much as 5 percent of its shares.

"We are seeing a bit of buying of the stock because they have managed to reaffirm their guidance for the full year," said Grant Williamson, a director of Hamilton Hindin Greene. "It's a relatively positive outlook. The company has gone through quite a few years of restructure and I think investors now might be seeing the benefits just starting to flow."

Nuplex more than tripled first-half earnings after it profited from the sale of its Masterbatch and Specialties businesses and because the year earlier period included significant one-time costs.

Net profit jumped to $37.3 million, or 18.8 cents per share, in the six months ended Dec. 31, from $11.4 million, or 5.8 cps, in the year earlier period, it said. The latest period included profit of $13.8 million from the sale of the two non-core units and a related one-time remediation cost of $3.4 million, while the year earlier period included a $14.6 million one-time expense.

"Europe, America and Asia delivered strong results, and whilst Australia-New Zealand is still in turnaround mode, it was good to see the recent restructuring initiatives moving the financial performance of the region in the right direction," said chief executive Emery Severin.

In the second half, Asia and North America is expected to grow at rates consistent with the first half, while Europe remains steady and margins improve in Australia and New Zealand amid flat demand, he said.

Nuplex used cash from the sale of its two Australasian units to reduce net debt to $122.6 million at Dec. 31, from $231.7 million at June 30. Its gearing, which measures net debt to net debt plus equity, dropped to 18.7 percent from 31.1 percent over the period.

In Nuplex's continuing operations, its Ebitda sales margin in the first half improved to 7.9 percent from 7.4 percent in the year earlier period.

The company is assessing plans for further growth initiatives in emerging markets, increasing investment in research and development and product development, identifying value creating investment opportunities and capital management. It expects to update shareholders on its plans following a review at the end of the June 2015 quarter.

In the first half, its European, Middle East and Africa unit increased earnings before interest, tax, depreciation and amortisation by 33 percent to $27.2 million as volumes rose 12 percent due to continued improvement in the European automotive industry and as it gained market share in flooring resins.

The company's Asian unit posted a 5 percent gain in Ebitda to $18.3 million as steady growth in South East Asia offset lower growth in China. Volumes increased 5.2 percent, reflecting higher capacity in Vietnam.

Steady growth in the Americas boosted Ebitda 13 percent to $10.4 million.

In its Australasian segment, Ebitda fell 68 percent to $3 million as lower margins in the Australian coating resins business weighed on the unit.

"Margins were impacted by the continuation of the intense pressure that had become evident in the second half of the prior financial year due to excess industry capacity and intense competition," Severin said. "Positively for Australia and New Zealand, both volumes and earnings were up when compared with the second half of the prior financial year."

Australasian margins also improved towards the end of the first half, he said.

The company reiterated annual Ebitda would be between $115 million and $125 million, including a five month contribution from its divested Nuplex Specialties and Masterbatch units.

Severin said it was too early to change its guidance to reflect the impact of falling oil prices on its input costs. The company also had to take account of the impact of a strong New Zealand dollar. he said.

It will pay a dividend of 10 cents per share on April 2, unchanged from the year earlier period.

(BusinessDesk)