Shake-up for Nuplex after profit warning

Emery Severin says the Australian composite business will be 'right-sized'. Photo / Natalie Slade

Specialty chemical maker Nuplex Industries, which yesterday cut its full-year earnings and net profit guidance, has ordered an immediate restructuring of its Australian composite business.

Demand for the composites had been weakened by restrained consumer spending, increased import competition due to a strong Australian dollar, wet weather and a reduction in infrastructure projects, the company said.

Nuplex's Sydney-based chief executive, Emery Severin, said the composites, which were mostly sold in Australia, had a range of uses, including in the manufacture of swimming pools and boats. The restructuring would involve "right sizing" the business to suit the current market conditions.

Nuplex said full-year earnings before interest, tax, depreciation and amortisation (ebitda) for the composite business were expected to be down $8 million on last year.

"We've had, in a sense, a perfect storm of events that have impacted our composites business - particularly here in Australia," Severin said.

He said it would take three to six months to turn that business around.

Nuplex expected group ebitda for the 12 months to June 30, 2011, to be in the range of $125 million to $129 million - a 7 to 11 per cent reduction on the forecast Nuplex provided at its November annual meeting. The revised ebitda guidance included provisions for one-off restructuring costs of $4 million, the company said.

Nuplex expected net profit to be between $62 million and $65 million, down from the $68 million to $75 million range given last year.

Severin said the downward revision of group guidance was largely a result of the troubles in the Australian composites business.

Goldman Sachs analyst Tristan Joll said the cut to the forecast was not unexpected, and despite the revision the full-year result still promised to be strong.

Nuplex said a review of its resins segments showed increasing raw material costs (as much as 25 per cent on some key inputs) were generally being addressed through bumping up selling prices, although a lag in price recovery continued. Volumes in the firm's coating resins business were up in the United States and Europe and steady in other markets.

Meanwhile, in a separate announcement, Nuplex said a restructured executive management team would "lead the company in the next stage of its development". The group's four regions - Australasia, the Americas, Asia and Europe and the Middle East and Africa - would now each have a regional president who reported to Severin.

Nuplex also said it was looking to invest in research and development in four product areas - performance coatings, water-borne coatings, composites and powder coatings.

Acquisition opportunities would be explored in markets where the firm had "existing competitive positions". Nuplex shares closed down 8c at $3.08 last night.

REVISED GUIDANCE

Year to June 30, 2011

* Ebitda: $125m to $129m

* Net profit: $62m to $65m

* Underlying ebitda: $129m to $133m