KEY POINTS:
Resins maker Nuplex stuck to its full-year forecast and boosted its dividend payout yesterday, despite rising raw material prices.
Net profit for the six months ending December 31 was $9.6 million, down from $40.9 million the previous year - which reflected a $24.4 million gain from the sale
of the Environmental Services business.
Trading profit (earnings before interest, tax, depreciation and amortisation) was $49.1 million, up from $47.2 million, with the latest half-year hit by costs of $6.8 million mainly from restructuring in the UK and Brazil.
However, managing director John Hirst said he was confident of hitting the full-year forecast.
"We see no reasons at this stage for giving us any concern that our current guidance in terms of full year ebitda of $103 million to $110 million should be an issue for us," Hirst said.
No further charges were expected from the Brazilian and UK operations where losses would be substantially reduced during the next six months and profits were anticipated during 2008.
The Nuplex board was confident enough in future performance to increase the interim dividend, Hirst said.
"The 10 per cent lift in dividend ... is keeping faith with what we have said to the shareholders in recent times that we will be driving the company towards trying to pay higher dividends every year and at least increasing dividends at CPI or better."
Shares closed down 4c yesterday at $7.
First NZ Capital analyst Jason Familton said the result was generally in line with expectations.
Taxation was a bit higher and margins a little softer than expected because of the ongoing impact of raw material costs and slightly weak demand, Familton said.
A high tax rate had impacted on profit, although a $6.8 million benefit from accumulated losses would start to be accrued in about 2009.
Raw material costs had increased by about 10 per cent on the previous year, Hirst said.
"Certainly in my 40 years in the business I have never seen a period like this last three years where we've just faced ever-increasing raw material prices quarter on quarter."
Raw material prices for the resins business might have peaked in January and a retreat during February was expected to continue.
Future petrochemical materials supply was looking better and crude oil prices had settled at a moderate level, he said.
"Just when that will have a significant impact on our margins is a little difficult to say but certainly during the second half of this current financial year we would anticipate some margin recovery," Hirst said.
The need to write down hedging accounts largely in New Zealand saw foreign exchange rates cut trading profit by $2 million. Australasia now accounted for 64 per cent of trading profit, down from 73 per cent, and as restructuring and overseas growth continued the balance would shift further, Hirst said.
Despite already undertaking restructuring work on current operations it appeared more acquisitions were not out of the question.
"It would be a very rare time indeed where there was not some acquisition opportunity being considered," Hirst said.
Nuplex needed to increase its presence in central and eastern Europe.
