$1.3m bill to defend case, says Nuplex

Emery Severin, CEO of Nuplex Industries Ltd. Photo / Natalie Slade

Nuplex estimates proceedings brought by the Securities Commission against the firm and its directors will cost more than $1.3 million to defend.

That would be about 2 per cent of the $64.2 million record net profit the listed resin maker reported for its last financial year.

Several of the firm's shareholders gasped when informed of the defence costs at the annual meeting in Auckland yesterday.

The commission alleges Nuplex and its directors John Hirst (now retired), Robert Aitken, Barbara Gibson, David Jackson, Bryan Kensington and Michael Wynter failed to disclose a banking covenant breach to the stock exchange within a specific time period.

Nuplex shares would have plunged by as much as 30 per cent had the company informed the market it was in breach of its covenants when the information first became available, the commission claims.

The firm's share price plunged by 35c in a single day in February 2009 when the company finally announced it was in talks with its bankers.

After yesterday's meeting, Nuplex chairman Robert Aitken said the regulator's proceedings were consuming the "time and focus" of the board of directors.

"In our view [the proceedings] are unfair to the directors of Nuplex and unfair to the shareholders of Nuplex because this is clearly a test case. The shareholders of Nuplex are being asked to fund a test case."

Aitken said material disclosures were a "grey area" within New Zealand's sharemarket regulation.

During the time period under question Nuplex's directors believed banking covenants were a confidential matter that remained between a company and its banks, he said.

Aitken said this was a defence that could be used when the case reached court.

The Securities Commission proceedings are not the only legal matter facing the 58-year-old manufacturing company.

Aitken said an "action which purports to be a class action" had been lodged against Nuplex and the former owner of a site in the United States following a chemical spill that took place during the 2010 financial year.

Nuplex managing director Emery Severin said the spill was caused by an overflow in a chemical holding tank at the site in Louisville, Kentucky.

The problem that caused the leakage had been rectified, and the outcome of the class action was not expected to be expensive, he said.

Nuplex yesterday gave a net profit forecast for the 2011 full year in the range of $68 million to $75 million, which would be a 6 to 17 per cent increase on the firm's 2010 result.

The NZX reacted positively to the news, with Nuplex's share price closing up 7c at $3.53.

Severin said the firm's European markets were holding up well, although there were signs of softening in the continent's car manufacturing sector, for which the company supplies products.

Volumes in China and Southeast Asia had also softened, he said, although indicators pointed towards increasing demand - especially within the Chinese automotivesector.

"Demand in the US and Australia has remained steady, while demand in New Zealand has been weak in line with the general economy and reflecting a very wet winter," Severin said.

He said Nuplex was wary of the impact the high Australian and New Zealand currencies would have on the business.

Grant Williamson, director of broking firm Hamilton Hindin Greene, said it was a positive forecast, within expectations.

Investors liked Nuplex as it gave them exposure to growing Asian markets, he said.

All resolutions at yesterday's annual meeting were passed, including a new incentive pay scheme for Nuplex executives, which prompted complaints from shareholders.

Aitken said Nuplex's indications about changing the firm's domicile to Australia, while retaining listings on the NZX and ASX, would "require a lot more research and discussion".

Any recommendation on a change in domicile would be put to a vote by shareholders, he said.

LOOKING AHEAD

Nuplex full-year forecast, 2011:

* Ebitda - $135m-$145m
* Net profit - $68m-$75m