Aust building slowdown drain on Nuplex's profit

Auckland-based resin manufacturer Nuplex says its net profit fell 21 per cent to $13.2 million in the June year against the previous year's $16.7 million.

Chairman Fred Holland yesterday blamed the profit fall on the dramatic slowdown in construction in Australia, but he said the industry was now picking up. The other drain on profit was a steep rise in the cost of raw materials.

The company declared a final dividend of 7c a share to bring the full-year dividend to an unchanged 15c.

"We view the 2000-01 year as a low point in the business cycle," said Mr Holland.

"The fundamentals for the future are seen as generally positive.

"The excellent performance of the New Zealand primary industry is yet to flow through into areas affecting our business and the turnaround of the Australian medical waste business, while in hand, will take time before it fulfils its potential."

He said the company was committed to a policy of growth to maintain its relevance in an increasingly regional, if not global, investment market and would increase investment in core businesses in Australia and New Zealand.

He said success in Vietnam had given Nuplex confidence in investment in Asia.

Sales revenue increased by 6 per cent to $406 million and earnings before interest, tax, depreciation and amortisation (ebitda) before abnormal items was 10 per cent lower at $47.4 million.

A loss from the Australian Medical Waste business acquired in January also affected the bottom line.

The rise in the petrochemical raw material costs for resins, driven by strong Northern Hemisphere demand, high crude oil prices and weak domestic currencies, continued through most of the year.

The extent of the construction industry downturn in Australia was unexpected and is seen as temporary. It resulted from a rush to complete housing projects before GST in July last year and the draining effect of the Olympics on consumer spending capacity.

Demand from Australia's building industry virtually dried up last September with a recovery to more normal demand in May of this year.

The construction products business, still mainly New Zealand based, suffered from bad debts arising from the collapse of several Auckland construction companies.

Increases in material costs could not be fully recovered because of a general slowdown in the industry.

- NZPA