Nuplex tips earnings growth after sale of units

Emery Severin.

Nuplex Industries, the specialty chemical manufacturer, expects earnings growth of up to 8.2 per cent in the 2015 financial year, as it sells businesses in Australia and New Zealand to become solely focused on its global resins business.

Annual operating earnings before interest, tax, depreciation and amortisation will be between $127 million and $137 million, up from $125.7 million in 2014, chief executive Emery Severin told shareholders at their annual meeting in Auckland. Last year the Auckland-based company revised its earnings guidance twice, citing competition across the Australia and New Zealand businesses that squeezed margins for both resins and specialty chemicals.

Last month the company announced the sale of its Nuplex Masterbatch plastic additives business and Nuplex Specialities distribution business for A$127.5 million ($142.5 million). Once the sale is finalised, operating ebitda for the group is forecast to be between $115 million and $125 million, including a five-month contribution from the specialties segment.

Severin said the company expected the deal to be completed by the end of this month and the initial loss of income from the sale will be offset by expansion in Asian operations.

"The expected growth outlook for the company is not reduced by the divestment of Nuplex Specialties and Masterbatch," Severin said.

"We continue to expect to deliver improved returns and earnings growth in the short to medium term as a result of the strategic initiatives [of] the past few years."

In the coming year, ANZ operations will benefit from the restructure, while modest growth in Asia and Europe is expected. Steady demand in its US market underlies the "expectation that this region will maintain the strong level of earnings delivered", Severin said.

Capital spending was $42 million in 2014 as Nuplex invested in its Changshu and Suzhou sites in China, upgraded its Wacol site in Queensland, Australia, and invested in plant in Russia and Indonesia. For the 2015 year, capex was expected to fall to about $35 million, the company said in August.

Shares in Nuplex closed down 5c yesterday at $3.09. The stock is rated an average of "buy" according to the consensus of six analysts surveyed by Reuters, with a median price target of $3.46.