NPX
24/02/2012 09:44
HALFYR
REL: 0944 HRS Nuplex Industries Limited
HALFYR: NPX: FY2012 HALF YEAR RESULTS RELEASE
Nuplex Industries Limited
Results announcement to the market
Reporting period 6 months to 31 December 2011
Previous reporting period 6 months to 31 December 2010
Amount (000s) Percentage change
Revenue from ordinary activities $746,512 down 2%
Profit from ordinary activities after tax attributable to security holder
$27,102 down 18%
Net profit attributable to security holders $24,105 down 22%
Net tangible assets per share (NZD) $1.70
Associates % holding
Quaker Chemical (Australasia) Pty Ltd 49%
Synthese (Thailand) Co Ltd
RPC Pipe Systems Pty Limited
Innospec Valvemaster Limited (UK) 47.5%
50%
50%
Interim/Final dividend Amount per security Imputed amount per security
Interim 10.0 cents per share 0.0 cents per share
Record date 19 March, 2012
Dividend payment date 2 April, 2011
Comments Unusual losses after tax for the current year comprise:
NZD '000
Nuplex US waste water discharge costs $141
Nuplex US tax audit legal costs provision $214
Acquisition transaction costs $2,642
Total unusual losses after tax $2,997
NZX/ASX release 24 February 2012
FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
Strong performance in Europe and the Americas, steady in Asia, offset by
weaker market conditions in Australia and New Zealand
KEY POINTS:
o Group sales revenue of $746.4 million, down 2% from the previous
corresponding period
o EBITDA of $57.3 million, down 12.0%
- includes $2.1 million negative impact from translating overseas earnings
into New Zealand dollars
o Net profit attributable to shareholders of $24.1 million, down 22.5%
o Earnings per share of 12.3 cents per share, down 23.6%
o Interim dividend of 10 cents per share in line with the previous interim
dividend
o Recovered previous period raw material cost increases
o Viverso integration on track and will be EPS accretive in this financial
year
o Maintained 2012 financial year EBITDA guidance, including recent
acquisitions, of between flat to 5% year on year growth
NZ$ millions
Change (%)
1H 2012 1H 2011 Actual FX Constant FX
Sales revenue 746.4 761.5 (2.0) 1.1
EBITDA 57.3 65.1 (12.0) (8.7)
NPAT attributable to shareholders 24.1 31.1 (22.5) (18.9)
Earnings per share (cents) 12.3 16.1 (23.6)
Dividend per share (cents) 10 10
ROFE , 12.1% 15.8%
Nuplex's CEO, Emery Severin said: "These results reflect the mixed trading
conditions experienced in the different markets and regions of our global
operations. Across the Group, improved unit margins and lower operating costs
were the result of our continued focus on margin management and the
implementation of NuLEAP initiatives. Additionally, we progressed those
growth initiatives undertaken in the past year to place Nuplex in a stronger
position for the medium term."
FINANCIAL RESULT OVERVIEW
Group sales revenue was $746.4 million, down 2% when compared with the same
period last year. Had exchange rates remained unchanged from the comparable
period last year, sales revenue would have been up 1%, predominantly
reflecting higher selling prices in the Resins segment due to the continued
recovery of previous period raw material cost increases.
In line with previous guidance, Group earnings before interest, tax,
depreciation and amortization (EBITDA) were $57.3 million, down 12% on the
$65.1 million achieved in the first half of the 2011 financial year. Ongoing
strength of the New Zealand dollar, particularly against the US dollar,
accounted for a quarter of the EBITDA decline.
Group EBITDA was predominantly impacted by weaker market conditions in the
Australian and New Zealand (ANZ) manufacturing and construction sectors.
These conditions resulted in ANZ volumes in the Resins segment being down
12.0% and sales in the ANZ Agency and Distribution business of the
Specialties segment being down 6.6% when compared with the same period last
year.
Net profit after tax attributable to shareholders (NPAT) for the six month
period ended 31 December 2011 of $24.1 million was down 22.5% on the previous
corresponding period, after accounting for $2.6 million of significant items
relating to the costs associated with the two acquisitions made during the
half. It was also impacted by losses from Nuplex's equity investment in
Fibrelogic.
Gearing as at 31 December 2011 was 27.8%, up from 11.7% as at 30 June 2011
due to the acquisition of Viverso for EUR75 million and Acquos's masterbatch
operations (Acquos) for A$23.5 million.
OPERATIONAL OVERVIEW
Nuplex continued to work towards achieving its safety goal of 'Zero Harm.'
During the first half, there were 25% less reportable injuries to employees
across the Group when compared with the same period last year, and both Asia
and the Americas were injury free. The Total Reportable Injury Frequency Rate
continued to decline from 12.8 per million hours worked as at 30 June 2011 to
8.7 as at 31 December 2011, however over the same period, the Lost Time
Injury Frequency Rate increased from 1.9 million hours worked to 3.5.
NuLEAP continued to improve the way we work and is on track to deliver $10
million in incremental benefits in the 2012 financial year and $30 million in
total benefits by the end of the 2013 financial year. In February 2012, one
of the larger NuLEAP initiatives was completed following the merger of
Nuplex's Agency and Distribution brands into a single group named Nuplex
Specialties. By bringing APS Chemicals, APS Food and Nutrition, APS
Healthcare, APS Surfactants, Multichem and Polychem together into a single
business unit, it will be easier for principals and customers to interact
with Nuplex, and increase market reach and presence.
Progress was made on Nuplex's organic growth projects in high growth markets.
In Vietnam, the capacity expansion is on track for first production in March
2012. In China, the planning and development for the new site at Changshu
continues, however the plans for a fourth site in Southern China have been
put on hold until market conditions improve. As announced in January 2012,
Nuplex has entered into an agreement to form a joint venture in Russia which
will allow Nuplex to gain on-the-ground experience in this growing, emerging
market.
As part of Nuplex's strategy to consolidate its market leading positions
through bolt on acquisitions, the German based Viverso was acquired for EUR75
million from Bayer MaterialScience. The integration began as soon as the
transaction closed on 31 December 2011 and is progressing well. Also, on 30
September 2011, Nuplex acquired Acquos's Australian masterbatch operations,
which are currently being integrated with Nuplex's existing masterbatch
operations Culamix, to form Nuplex Masterbatch, the leading colour and
plastics additive producer in ANZ.
R&D
While work continues with Nuplex's internal R&D program, the acquisition of
Viverso has extended Nuplex's existing technologies. As Viverso's product
portfolio is complementary to Nuplex's own portfolio, many of the newly
acquired products will be introduced across Nuplex's global operations. New
technologies to Nuplex include hydrophobic polyols used in construction for
water proofing and hygiene applications and polyesters used for the
manufacture of industrial putties used in vehicle refinish markets and
kitchen bench tops.
2012 FINANCIAL YEAR OUTLOOK
"We will continue to respond to the uncertain global economic conditions
through focusing on margin management and cost control. We have maintained
our 2012 financial year EBITDA guidance from our operations (excluding the
recent acquisitions of Acquos and Viverso) to be approximately 5 to 10% lower
than in the 2011 financial year, primarily as a result of the ongoing
weakness in ANZ. Additionally, we continue to forecast earnings, including
the recent acquisitions, to deliver between flat to 5% year on year EBITDA
growth.
"Last year, we took a number of steps to develop and enable our strategy of
securing the base of our operations, creating a winning environment for our
employees and building a platform that will see Nuplex well placed to deliver
profitable growth in the medium term. In 2012, our focus is very much on
executing those initiatives undertaken in 2011 including the delivery of
NuLEAP benefits and organic growth in emerging markets as well as realising
the benefits from consolidating our position as a leader in solvent borne
resins in Europe through the integration of Viverso," said Mr Severin.
DIVIDEND
The Board has resolved to pay an interim dividend of 10 cents per share, in
line with the interim dividend paid in 2011. It will be franked at 50% for
Australian shareholders, but will not carry any New Zealand imputation
credits. The dividend will be paid on 2 April 2012, to all shareholders on
the register on 19 March 2011.
The Dividend Reinvestment Plan remains suspended for this period.
For further information, please contact:
Josie Ashton, Investor Relations ? +612 9666 0342 ? [email protected]
REVIEW OF RESULTS
Resins Segment
Nuplex's largest segment is Resins, which includes the global coatings
operations involved in the production and supply of polymer resins for
surface coatings of consumer and industrial goods. The Resins segment also
includes the Composites, Pulp and Paper and Construction Products businesses
which are all located in Australia and New Zealand.
Nuplex's global coatings operations, referred to as Coating Resins,
contribute approximately 80% of the Resin segments sales (excluding Viverso),
with the balance coming from the Composites, Pulp and Paper and Construction
Products businesses.
Resins Segment (NZ$ million) Change (%)
1H 2012 1H 2011 Actual FX Constant FX
Sales Revenue
Australasia 215,830 238,901 (9.7) (9.9)
Asia 127,168 126,330 0.7 7.1
Europe, Middle East & Africa 183,957 181,791 1.2 6.3
Americas 68,558 65,813 4.2 13.6
Total resins sales revenue 595,513 612,835 (2.8) 1.0
EBITDA
Australasia 11,278 16,674 (32.4) (32.6)
Asia 12,920 14,841 (12.9) (7.5)
EMEA 16,263 14,608 11.3 16.8
Americas 6,488 6,335 2.4 11.3
Total resins EBITDA 46,949 52,458 (10.5) (6.4)
EBITDA/sales margin (%) 7.9% 8.6%
Resins segment sales for the first half were $595.5 million, down 2.8% (up 1%
on a constant currency basis). Selling prices increased to recover previous
period raw material cost increases, whilst volumes were down by 5.5% when
compared with the previous corresponding period.
First half EBITDA was down 10.5% to $46.9 million from $52.5 million in the
previous corresponding period. A higher New Zealand dollar accounted for
almost half of the decline in EBITDA.
The decline in EBITDA was predominantly due to lower ANZ volumes in both the
Coating Resins and Composites businesses.
EBITDA was up in Europe and the Americas as slightly lower volumes were
offset by margin recovery and lower costs. In Asia, while volumes were
steady, earnings were impacted by an additional $1 million in allocated R&D
costs associated with the increasing focus of R&D on developing Asian
markets. On a constant currency basis, before the increased R&D charge,
EBITDA for the region was flat half on half.
Partially offsetting the decline in EBITDA was a return to more normal
margins. Unit margins were up in all four regions as previous raw material
cost increases were recovered.
AUSTRALIA and NEW ZEALAND (ANZ)
Overall regional volumes for the first half were 12% lower compared to the
same period last year.
Coating Resins
In Australia, volumes continued to be impacted by reduced demand from the
manufacturing and construction sectors, as well as increased import
competition resulting from the ongoing strength of the Australian dollar at
all levels of the value chain. In particular, demand for resins used in ink
and textile applications has declined as demand has moved offshore.
In New Zealand, demand from the domestic economy for decorative application
resins and adhesives remained steady. However, the ongoing strength of the
New Zealand dollar reduced demand for exports to Asia and Pacific regions,
resulting in a decline in volumes when compared with the same period last
year. Continuing earthquakes in Christchurch delayed any rebuild activity,
which is now expected to occur later in 2012.
Composites, Pulp & Paper and Construction Products
Composite sales were down when compared with the same period last year
reflecting a weaker market, reduced sales to the infrastructure sector as
projects were delayed, and lost market share due to increased competition.
Reduced demand from Fibrelogic also impacted Composite volumes. The
restructure of Fibrelogic is progressing. Infrastructure project activity is
expected to increase during the first half of calendar 2012 and Fibrelogic is
forecast to return to profitability towards the end of the 2012 financial
year.
During the half, the restructure of Nuplex's multiple composite brands into
Nuplex Composites was completed and realised $3 million in annualized costs
savings.
Looking forward, Nuplex does not expect demand for composites to return to
pre 2008 levels as the market has structurally shifted with many sectors
relocating offshore and being replaced by imported end products.
Pulp and Paper and Construction Products volumes were slightly down when
compared with the previous corresponding period.
ASIA - Coating Resins
Across the region, and particularly in China, demand conditions were impacted
by reduced economic activity. Reflecting the general economic slowdown,
volume growth for the region was flat when compared to the previous half year
with volume growth in China, Vietnam and Malaysia offset by lower volumes in
Indonesia.
EUROPE, MIDDLE EAST and AFRICA (EMEA) - Coating Resins
EMEA volumes were 5% lower than in the previous corresponding period. Steady
demand from the Northern economies was underpinned by industrial production
in Germany. Weaker demand from the Southern economies impacted the powder
resins business in which volumes were 13% lower than in the previous
corresponding period. Export volumes were also down compared to the same
period last year due to the political situation in the Middle East and
reduced sales to Asia.
AMERICAS - Coating Resins
In the Americas, despite strengthening demand from the industrial sector
towards the end of 2011, the subdued levels of economic activity at the
beginning of the half combined with the ongoing weakness in construction
markets resulted in volumes being 4% below the comparable period.
Specialties Segment
Nuplex's Specialties segment consists of two businesses, Nuplex Specialties
and Nuplex Masterbatch. Nuplex Specialties acts as an agent for the sale and
distribution of internationally manufactured products to a wide range of
industries including the plastics, food and nutrition, pharmaceutical and
healthcare, mining and agricultural sectors. Nuplex's Masterbatch operations
produce colour and performance additives for the plastics industry in
Australia and New Zealand.
Nuplex Specialties, the Agency and Distribution business is expected to
contribute approximately 70% of the Specialty segment sales once Nuplex
Masterbatch is included for a full 12 months.
Specialties Segment (NZ$ million) Change (%)
1H 2012 1H 2011 Actual FX Constant FX
Sales Revenue 150,899 148,711 1.5% 1.4%
EBITDA 10,381 12,666 (18.0) (18.1)
EBITDA/sales margin (%) 6.9% 8.5%
First half sales revenue was $150.9 million, up 1.5% on the previous
corresponding period, and includes the addition of the three month
contribution of Acquos's masterbatch operations (Acquos). Earnings for the
half were down 18% to $10.4 million mainly reflecting the lower sales in the
Australian Agency and Distribution business.
Nuplex Specialties - Agency and Distribution
Whilst first half sales in New Zealand were up 5%, in Australia they were
down 10% compared with the previous corresponding period reflecting weaker
demand from all areas involved in and related to manufacturing, particularly
in plastics, coatings and surfactants. Sales which relate to every-day
consumer consumption such as Food & Nutrition, Healthcare and Pharmaceuticals
continued to grow.
Masterbatch
Sales increased due to the three month contribution from Acquos, however,
overall Masterbatch sales were lower than expected as a result of the weaker
Australian manufacturing conditions. The earnings contribution from Acquos
was not material due to one-off costs associated with the restructure of the
two businesses, incurred in the half.
FINANCIAL REVIEW
CASH FLOWS
First half cash flow from operations was $21.3 million, down 6.8% from $22.8
million when compared to the previous comparable period.
In line with management's target range for its working capital to sales ratio
of between 15 and 17%, working capital to sales for the period was 15.8%,
0.5% lower than for the previous corresponding period.
Capital expenditure for the period excluding acquisitions was $13 million. Of
this total, expenditure on stay-in-business capital projects was $7.5
million, equivalent to 81% of depreciation. The balance of $5.5 million was
spent on growth initiatives including USD $2.4 million relating to the
capacity expansion in Vietnam.
BALANCE SHEET
Net debt increased to $216 million from $74 million at 30 June 2011 due to
the two acquisitions made in the half. Net debt to net debt plus equity has
increased to 27.8% from 11.7% as at 30 June 2011 and is within the Board's
target range for net debt to net debt plus equity of 20% to 35%.
FUNDING
As previously announced, in August 2011, Nuplex completed the renegotiation
of its bank facilities through to August 2014. Under the new facilities,
first half financing costs were $2.9 million lower than in the previous half
year.
To fund the Viverso acquisition, an additional EUR75 million facility was
secured, increasing total available debt facilities to approximately AUD$300
million. Nuplex continues to assess options to convert the new facility into
long term debt.
DIVIDEND
The Board has resolved to pay an interim dividend of 10 cents per share,
representing a dividend payout ratio of 81% of net profit attributable to
shareholders. It will be franked at 50% for Australian shareholders, but will
not carry any New Zealand imputation credits. The dividend will be paid on 2
April 2012, to all shareholders on the register on 19 March 2011.
The Dividend Reinvestment Plan remains suspended for this period.
STRATEGIC INITATIVES
NuLEAP
NuLEAP is on track to deliver target benefits of $30 million by the end of
the 2013 financial year. With many of the initiatives now implemented across
the Group, NuLEAP is having a positive impact on costs - for example, on a
constant currency basis and excluding recent acquisitions, manufacturing
costs for the past six months were down 3% on the comparable period last
year.
ORGANIC GROWTH PROJECTS
Asia
The doubling of Nuplex's waterborne capacity in Vietnam remains on track for
commissioning in March 2012 and in line with its estimated budget of US$7.5
million. The EBITDA contribution from the new capacity is expected to be
between US$0.5 to US$1 million in the 2013 financial year. Additionally it is
anticipated that it will take around 4 years for the capacity to be filled.
In China, Nuplex continued to progress the permitting and approvals process
for the new site at Changshu. Commissioning is still expected to occur around
the middle of 2013 at a cost of approximately US$35 million. Combined with
the Vietnam expansion, these two investments will increase regional capacity
by around 50% within the next three years.
The search for a suitable fourth site in Southern China has been put on hold
due to the weaker market outlook. Once market conditions improve, the work
undertaken to date, will enable Nuplex to quickly progress a fourth site.
EMEA
As announced after balance date, Nuplex has agreed to form a joint venture in
Russia with the Kvil Group, a local paint and resins producer. Initially the
joint venture will be focused on forming a sales and marketing partnership
into which Nuplex will invest EUR2.5 million. Subject to market conditions,
in two years' time, the joint venture will build a resins manufacturing site
in Belgorod, Russia to supply high quality resins to the multi-national
coatings companies who are currently increasing their local presence as well
as meet the quality requirements of the growing local paint companies.
CONSOLIDATING MARKET LEADING POSITIONS
ANZ
As part of building a leading market position for Nuplex's masterbatch
operations Culamix, the Group acquired Acquos's masterbatch operations
(Acquos) for a consideration of A$23.5 million. The integration of these two
businesses into Nuplex Masterbatch has formed Australia and New Zealand's
leading supplier of colour and plastic additives. The acquisition is expected
to contribute around A$5 million EBITDA in the 2013 financial year.
EMEA
In October, Nuplex announced the acquisition of Viverso, a resins and putties
manufacturer for EUR75 million. Operating out of its state-of-the-art
manufacturing facility in Germany, the integration of Viverso into Nuplex's
European and global network strengthens Nuplex's operations through;
o Securing Nuplex as a top four resins provider in the region
o Consolidating its market leading position in solvent borne resins
o Providing on-the-ground access to the German industrial markets and
increased proximity to Eastern European coating markets
o Increasing EMEA's regional capacity by approximately 50%
o Extending Nuplex's product portfolio to include products which will be
leveraged across Nuplex global operations
Since the transaction was completed on 31 December 2011, the integration has
progressed and is on track for the name change to occur on 1 March 2012.
Customer interest in those regions where Viverso products were not previously
produced locally, such as Asia, has been positive and in Europe, many of the
initial conversations between Nuplex and Viverso customers have been well
received.
Viverso is expected to be EPS positive in this financial year after
integration costs. Assuming a continuation of current trading conditions
throughout the 2013 financial year the acquisition is expected to contribute
EBITDA of in excess EUR12 million.
Subject to unforeseen circumstances and economic uncertainty, the earnings
contribution in the 2013 financial year from Viverso, the integrated
Masterbatch operations and the new capacity in Vietnam is expected to
contribute between 3 cents and 5 cents per share.
FY12 OUTLOOK
REGIONAL OUTLOOK
In Australia and New Zealand, lower levels of activity in the manufacturing
and construction sectors continue to impact on demand. Reflecting these
weaker conditions, volumes in the ANZ Resins segment are now expected to
decline by approximately 9% year on year, slightly more than the 6% decline
previously forecast. Sales in the Specialties segment are expected to be up
5% year on year, reflecting nine months of contribution from Acquos and
offset by reduced Agency and Distribution sales. These weaker than previously
expected conditions are already reflected in the 2012 financial year earnings
guidance provided in December 2011 and reiterated below.
Given the current weak Australian manufacturing climate, Nuplex is in the
process of examining the extent to which these market conditions reflect any
structural decline in the segments it serves and how this may impact Nuplex's
Australasian operations.
In Asia and consistent with the moderate growth rates being experienced
across the region, volumes are expected to be flat year on year.
In Europe, although demand levels in the northern European economies continue
to hold, due to the reduced demand from southern European based customers and
reduced exports to the Middle East, management continues to expect volumes,
excluding Viverso, to be down 5% versus the previous year.
The US continues its slow and steady recovery, and following a record volume
year in the 2011 financial year, volumes are expected to be flat in the 2012
financial year.
FY12 EARNINGS GUIDANCE
Nuplex continues to expect EBITDA from operations (excluding the acquisitions
of Viverso and Acquos) in the 2012 financial year to be approximately 5 - 10%
lower than EBITDA in the previous financial year. This forecast is based on
average foreign exchange rates applicable for the six months ended 31
December 2011 and includes the anticipated full year impact of the continued
strength of the New Zealand dollar, which is expected to be around $5
million.
Nuplex continues to forecast earnings, including the recent acquisitions, to
deliver between flat to 5% year on year EBITDA growth in the 2012 financial
year.
EBITDA in the second half of the 2012 financial year will benefit from
Viverso and the Masterbatch earnings, as well as additional NuLEAP benefits.
It will also include the earnings from the new Vietnamese capacity due to be
commissioned in March 2012.
While the Company's Dividend Policy is to payout between 55 and 65% of full
year net profit, given the Board's confidence in the medium term outlook and
the lower than previously expected levels of organic capital expenditure in
the current year, the 2012 full year dividend is expected to be of a similar
level to the 2011 financial year full year dividend.
ALSO ATTACHED TO THIS ANNOUNCEMENT IS A COPY OF THE FY2012 HALF YEAR
FINANCIAL STATEMENTS TOGETHER WITH THE ASX APPENDIX 4D
End CA:00219972 For:NPX Type:HALFYR Time:2012-02-24 09:44:49
