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Resins and chemical maker Nuplex Industries is the latest company to cut profit forecast in the face of the global economic downturn.
Shares in Nuplex closed down 21c yesterday at $2.67 after the company said trading profit (earnings before interest, tax, depreciation and amortisation) for the first half
of the 2009 financial year was expected to be $42.5 million, compared with guidance in November of between $45 million and $50 million.
Operations continued to be impacted by volatile trading conditions, while restructuring costs and non-recurring items totalling $2.1 million, plus additional provisions for bad and doubtful debts of $3.2 million had reduced the trading profit, Nuplex said.
Managing director John Hirst said he felt pretty good about the result.
"[It] really just reinforces our view that we have a fundamentally sound business that is dealing in those segments of industry that will continue to have some demand," he said.
European demand had fallen substantially during the period, in part because of inventory reduction programmes by customers, which hit performance in November and December.
The performance in other regions was close to expectation, Nuplex said.
The company said conditions worldwide remained generally soft, with the worst affected sectors exposed to high levels of discretionary spending, such as new automobile production and the leisure segments of the composites industry, including boats and swimming pools.
"Management continues to implement a broad range of initiatives to conserve cash and minimise costs, and will continue to position the business appropriately for market conditions, Nuplex said.
"This will ensure that the company has the productive capacity and cost base to be highly competitive when the inevitable pick-up in demand occurs."
During the second half of the year performance in Europe was expected to improve with inventory levels in line with demand, while results in other regions were expected to be similar to the first half.
The full benefit of restructuring would become available in the 2010 financial year, Nuplex said, with a lower operational cost base and reducing raw material costs.
Revising down
* In December PGG Wrightson cut its net earnings forecast for the June year to $39 million-$45 million, from $46 million-$51 million.
* In January Contact Energy said its earnings might fall by about 15 per cent and underlying net profit by 20 to 23 per cent
* Also last month Michael Hill warned its first-half result would be materially below last year's record of $19.5 million.