Nuplex's silence angers investors

The board of resins and paint manufacturer Nuplex has come under fire for failing to reveal a breach of its banking covenant that led to the company having to raise $160 million in new capital this year.

Shareholders at the company's annual meeting in Auckland yesterday were angry the news became public only after it was leaked by a Wellington brokerage firm and the company's share price plummeted, prompting an inquiry from the NZX.

Shareholder Hugh Dicky said Nuplex had given a profit warning in November and downgraded its earnings in February without mentioning that it had breached its banking covenants.

"My understanding is that something that is price-sensitive should be announced to shareholders."

Another shareholder called for the board to get its head out of the sand and be more upfront with its shareholders.

"I don't want to have to learn what is happening with my company through some Wellington sharebroker. It's not the way the company should be operating."

Nuplex chairman Rob Aitken said the details of banking covenants were confidential between the company and its bankers but admitted that revealing a potential breach to shareholders was a grey area.

The board also took a hammering over its decision to drop an executive incentive scheme allowing the management to wipe out $1.7 million in low-interest loans to the company.

"This is yet another company where there has been a failure of its incentive schemes for management," one shareholder said.

Aitken said the company's incentive scheme was under review. He said the decision to drop the current long-term scheme had been made for commercial reasons because the loans were putting added pressure on the executives at a volatile time and affecting their motivation.

Aitken acknowledged the 2009 financial year had been challenging and particularly unsettling for many shareholders but the good news was that sales revenues in most markets appeared to be stabilising.

The company upgraded its earnings for the year from a previously expected $100 million to a range of $100 million to $110 million and forecast its net profit to be between $36 million and $44 million - an increase of between 53 and 86 per cent on last year.

But the one area that remained of particular concern was the poor state of trading in New Zealand.

Aitken said that was being caused partly by the relatively worse economic environment but also by the move of many traditional customers to lower-cost operations overseas.

"We may well remain as a supplier to these customers sourcing product from our Asian facilities in particular."

But the company had extensive infrastructure in New Zealand and that would have to be assessed in the future.

Managing director John Hirst, who announced he would resign in June next year after more than 40 years with the company, said Nuplex would need to become more flexible and efficient to cope.

"We still have to be cost-comparable and that is a challenge in New Zealand. But I am quite comfortable we can achieve that."

The company was looking at a range of changes but was not talking about laying off staff, he said.

The board also said it was considering changing Nuplex's domicile country to Australia for tax purposes.

Hirst said Nuplex's New Zealand shareholders, which make up about 80 per cent of its register, were currently at a disadvantage because the company did not pay much tax in New Zealand and investors could not use imputation credits to reduce their tax on dividends. The company already has its headquarters in Sydney.

Nuplex's share price closed up 12c yesterday at $2.52.