NPX
17/08/2012 10:07
FLLYR
REL: 1007 HRS Nuplex Industries Limited
FLLYR: NPX: NUPLEX INDUSTRIES FY12 RESULTS RELEASE
Nuplex Industries Limited
Results announcement to the market
Reporting period 12 months to 30 June 2012
Previous reporting period 12 months to 30 June 2011
Amount (000s) Percentage change
Revenue from ordinary activities $1,615,897 up 2.6%
Profit from ordinary activities after tax attributable to security holder
$66,167 down 2.6%
Net profit attributable to security holders $62,533 down 6.0%
Interim/Final dividend Amount per security Imputed amount per security
Final
11.0 cents per share
0.0 cents per share
Record date 28 September, 2012
Dividend payment date 12 October, 2012
Dividend Reinvestment Plan to apply at no discount
Comments Unusual (gains)/losses after tax for the current year comprise:
NZD
'000
Nuplex Resins LLC waste water discharge legal provision 142
Acquisition related legal and consulting costs 3,033
US tax audit legal costs 459
Total unusual losses after tax 3,634
NZX/ASX release 17 August 2012
FINANCIAL RESULTS FOR THE 12 MONTHS ENDED 30 JUNE 2012
KEY POINTS:
o EBITDA , of $131.0 million, in line with prior year EBITDA
o Strong second half EBITDA of $73.7 million
o Net profit attributable to shareholders of $62.5 million, down 6%
o Earnings per share (EPS) of 31.8 cents per share, down 7%
o Full year dividend maintained at 21 cents per share
o Resins segment unit margins up 6% on constant currency basis
o Greater than expected incremental benefits from NuLEAP of $14 million
o Viverso EBITDA contribution of $10.4 million (EUR6.3 million) in the second
half of the year
NZ$ million Change (%)
FY2012 FY2011 Actual Currency Constant Currency
Sales revenue 1,615.9 1,575.0 2.6% 6.9%
EBITDA 131.0 130.9 0.1% 5.0%
NPAT attributable to shareholders 62.5 66.5 (6.0)% (1.2)%
Earnings per share (cents) 31.8 34.2 (7.0)% -
Dividend per share (cents) 21.0 21.0 - -
Return on Funds Employed 13.0% 15.8% - -
Nuplex Industries Limited CEO, Emery Severin said Nuplex recorded solid
earnings for the year to 30 June 2012, in line with updated guidance provided
to the market in December 2011, even though market conditions continued to be
challenging.
Mr Severin said the result highlighted the resilience of Nuplex's geographic
and product diversity and the benefits of disciplined margin management,
operational improvement initiatives and contributions from recent
acquisitions. Mr Severin also said it was particularly pleasing to see
earnings from the recently acquired German resin manufacturing business,
Viverso, exceed guidance.
"To deliver earnings in line with the prior year is a credible result
considering the softer market conditions experienced in Asia and Europe and
the particularly tough trading conditions faced in Australia and New Zealand.
"Pleasingly, we had a strong second half as a result of improved unit margins
in our global Resins segment, the delivery of greater than expected NuLEAP
benefits and the first full six months earnings contribution from Viverso.
Combined, these factors offset the impact of lower volumes in our global
Resin segment and the stronger New Zealand dollar," Mr Severin said.
Financial Result Overview
Group sales revenue was $1.616 billion, 2.6% higher than in the prior year
due to the first full six month contribution from Viverso and the positive
impact from pricing actions taken to recover higher raw material costs.
Group EBITDA was $131.0 million, in line with management guidance and the
$130.9 million achieved in the prior year. EBITDA was driven by the
contribution from Viverso, NuLEAP initiatives and an improvement in Resins
segment unit margins which offset lower Resins segment volumes and lower
Specialties segment sales, excluding acquisitions.
EBITDA, excluding Viverso was $120.6 million down 8% compared with the prior
year. Assuming exchange rates were unchanged over the year, EBITDA excluding
Viverso was $126.3 million, down 4% compared to the prior year.
The integration of the Viverso acquisition is progressing well and in line
with expectations. In the first six months of Nuplex ownership it delivered
$10.4 million (EUR6.3 million) of EBITDA, which exceeded previous management
guidance of EUR5 million.
Group net profit after tax attributable to shareholders (NPAT) for the 12
month period ended 30 June 2012 was $62.5 million, down 6% (down 1% at
constant currency) from the prior year. Unusual items of $3.6 million after
tax were incurred during the year relating primarily to costs associated with
the acquisition of Viverso.
Net debt as at 30 June 2012 increased to $220 million following the
acquisitions of Viverso for EUR69.3 million and Acquos's masterbatch
operations for A$20.9 million during the year. Accordingly, gearing
increased to 28% from 12% as at 30 June 2011, and remains within the Board's
target gearing range of between 20 to 35%.
Nuplex further diversified its funding sources during the period, announcing
in June that it had raised US$105 million of notes through a US Private
Placement market, maturing in 2019 at a coupon rate of 6.125%. The funding
was settled on 30 July 2012 and converted into Euros.
Strategic Update
Mr Severin said: "Central to securing our long term success is our ongoing
focus on achieving our safety target of 'Zero Harm' and during the year we
continued to invest in achieving this goal. Disappointingly, our Lost Time
Injury Frequency Rate increased to 2.5 per million hours from 1.2 a year ago.
Encouragingly, our Total Reportable Injury Frequency Rate reduced by 30%.
"Two years into our NuLEAP, our operational improvement program and we are
seeing improved efficiencies across the business. This year, NuLEAP delivered
$14 million in incremental benefits, exceeding our target of $10 million for
the period. While there is still work to be done, we are well on our way to
delivering $30 million in benefits by the end of the 2013 financial year.
"In a major milestone for our capital expenditure program to increase our
Asian capacity by 50% by the end of the 2014 financial year, in May, we
commissioned the new plant at our site in Vietnam. In China, the approval
process for our new, third site in Changshu is progressing, albeit at a
slower pace than expected. As a result, construction is expected to begin
towards the end of the year.
"The integration of Viverso is progressing smoothly. The business has been
renamed Nuplex and we are already seeing the benefits of being a German based
producer, having increased proximity to Central and Eastern Europe and
leveraging the acquired products across our global operations" said Mr
Severin.
Australia and New Zealand operational review
Nuplex continued with its previously announced review of its Australian and
New Zealand (ANZ) operations. The review is focused on ensuring that the ANZ
operations are aligned to demand conditions that occur through the economic
cycle. Management is carefully analysing and evaluating the many issues and
stakeholders involved and will provide an update before the end of 2012.
Outlook
Mr Severin said: "Our sights are firmly set on our ambition to be the world's
leading, trusted, independent resins manufacturer and leading specialty
chemicals distributor in Australia and New Zealand and in doing so, deliver
improved returns and sustainable earnings growth to shareholders."
"Our strategy to achieve our ambition remains the same - we are continuing to
strengthen Nuplex's margins through the pursuit of operational excellence and
to grow Nuplex's earnings by building market leading positions in select
market segments through organic growth, innovative R&D, and disciplined
acquisitions.
"We expect the current challenging business and market conditions to continue
throughout the 2013 financial year. Our focus will remain on managing costs
and margins as well as improving our operational performance to enable us to
navigate these difficult times and ensure we are well placed to capture the
earnings upside when conditions improve" said Mr Severin.
Assuming a continuation of current market conditions, 2013 financial year
EBITDA will benefit from additional NuLEAP improvements, the new capacity in
Vietnam (estimated to be between US$0.5 and US$1 million), Viverso (estimated
full year contribution of at least EUR12 million) and Nuplex Masterbatch
(estimated full year contribution of A$5 million).
Dividend
The Board has declared a final dividend of 11 cents per share, maintaining
the full year dividend in line with the prior year full year dividend. This
represents a 66% payout ratio of net profit attributable to shareholders. It
will not be franked for Australian shareholders and will not carry any New
Zealand imputation credits. The dividend will be paid on 12 October, to all
shareholders on the register on 28 September 2012.
The Dividend Reinvestment Plan will be reinstated. There will be no discount
to the price applied to ordinary shares issued.
For further information, please contact:
Josie Ashton, Investor Relations ? +612 9666 0342 ? [email protected]
OPERATIONAL REVIEW
SAFETY, HEALTH & ENVIRONMENT
Nuplex's Total Reportable Injury Frequency Rate declined to 9.0 per million
hours worked from 12.8 as at 30 June 2011, a 30% improvement on the prior
full year. Over the past 12 months, the Group's Lost Time Injury Frequency
Rate increased to 2.5 million hours worked from 1.2 million, reflecting an
increase in muscle strain injuries predominantly in Australia and New
Zealand. There were no Lost Time Injuries (LTI) in Asia or the Americas
during the year and 19 of Nuplex's 26 sites were LTI free.
NULEAP
As confirmed by an independent audit of the program, NuLEAP delivered $14
million in incremental benefits for the period, exceeding its $10 million
target. The program remains on track to deliver its total program target of
$30 million at the end of the 2013 financial year.
Approximately 50% of the incremental benefits realised in the 2012 financial
year related to cost savings, with the balance split evenly between sales and
procurement initiatives.
RESEARCH & DEVELOPMENT (R&D)
In May 2011, at the time of the management restructure, dedicated overlay
teams for each of Nuplex's four key product areas were created. Their
specific function is to better leverage Nuplex's technology portfolio across
all regions. Over the past 12 months, examples of regional technologies
leveraged into Asia include the introduction of ANZ developed water borne
textile and high end decorative coatings as well as European developed high
performance metal coatings used in industrial goods such as trains and
machinery.
During the second half of the 2012 financial year, the Board approved the
building of an R&D Applications Centre in China. The centre will support
Nuplex's organic growth ambitions in the region and enable the development of
innovative solutions to meet specific Asian based customers' needs. Expected
to cost US$2 million, it will be built at Nuplex's site in Suzhou.
RESINS SEGMENT
As Nuplex's largest segment, it includes the global coatings operations
referred to as Coating Resins. The Coating Resins operations are involved in
the production and supply of polymer resins, a key ingredient in the
production of surface coatings used in consumer and industrial goods and
contribute approximately 80% of the Resin segments sales (including 6 months
of Viverso).
The segment also includes Nuplex Composites, Australia and New Zealand's
leading composites resins producer which is looking to grow its South East
Asian presence through its operations in Vietnam. Additionally, the Resins
segment also includes Nuplex's Australian and New Zealand based Pulp and
Paper and Construction Products businesses.
RESINS SEGMENT
(NZ$ million) FY12 Volume Growth SALES REVENUE EBITDA
FY12 FY11 Change (%) FY12 FY11 Change (%)
Actual Currency Constant Currency Actual Currency Constant Currency
ANZ (12.0)% 402.7 462.3 (12.9)% (11.8)% 19.7 26.0 (24.5)% (23.4)%
Asia 4.2% 255.8 256.3 (0.2)% 4.2% 26.6 28.4 (6.3)% (2.1)%
EMEA
- Existing operations (5.1)% 387.2 411.2 (5.8)% 1.5% 38.6 38.7
(0.1)% 7.8%
- Viverso - 117.3 - - - 9.4* - - -
Americas (2.3)% 147.8 143.0 3.3% 9.9% 16.0 14.4 11.1% 17.4%
TOTAL 3.9% 1,310.8 1,272.8 3.0% 8.1% 110.3 107.5 2.7% 8.5%
*Excludes additional NZ$1 million EBITDA contribution embedded in other
regions
Volumes in the global Resins segment were up 4% compared with the prior year
due to the six month inclusion of Viverso.
Volumes excluding the contribution from Viverso were down 5% year on year,
primarily driven by the weakness in ANZ, where volumes were down 12%.
On a constant currency basis, unit margins were up 6% over the course of the
year as a result of continued pricing actions taken to recover higher raw
material costs incurred in the prior year as well as the benefit of NuLEAP
procurement and sales mix initiatives.
EBITDA for the year was $110.3 million, up 3% (up 8% at constant currency)
versus the prior year due to the contribution of Viverso. Excluding Viverso
and assuming exchange rates remained unchanged over the year, Resins segment
EBITDA was $105.4 million, down 2% year on year as improved unit margins and
NuLEAP benefits largely offset volume weakness.
Australia and New Zealand (ANZ)
ANZ Resin segment sales were down 13% (down 12% at constant currency) versus
the prior year due to volumes falling 12%, largely as a result of the
significantly weaker Australian construction markets. Volumes were also
impacted by the continuation of subdued Australian manufacturing conditions
and ongoing weakness in the New Zealand construction markets. EBITDA was down
25% (down 23% at constant currency) reflecting the volume weakness
experienced across the region.
Coating Resins
In Australia, the demand for decorative application resins and construction
related materials was impacted by the deterioration of the residential and
commercial construction markets which resulted in significantly lower volumes
when compared with the prior year. Volumes were also impacted by the slowdown
in the renovations market as a result of the low levels of business and
consumer confidence.
The Australian manufacturing sector continues to undergo structural change as
the ongoing strength of the Australian dollar impacts all levels of the value
chain. In particular, demand for resins used in ink and textile applications
continues to decline as Nuplex's customers' customers continue to switch to
imports or move production offshore.
In New Zealand, volumes were also lower when compared with the prior year as
overall building activity hit a ten year low in September 2011. Additionally,
the strength of the New Zealand dollar reduced demand for exports into the
Pacific region.
Whilst retaining a disciplined margin management approach, Nuplex maintained
its ANZ market share despite ongoing competition from imports. Additionally,
margins were supported through pricing actions taken to recover higher raw
material costs experienced in the prior year.
Composites, Pulp & Paper, Construction Products
Composite sales were down year on year due to lower volumes as a result of
the ongoing impact of weak consumer confidence, subdued manufacturing
conditions, competition from imports and lower activity in the infrastructure
markets.
Nuplex does not expect demand for composites to return to pre 2008 levels as
many composite manufacturing processes have moved offshore. Over the past 12
months, A$3.6 million in annualised cost savings have been realised through
restructuring this business and work continues to reduce costs and strengthen
the customer value proposition.
Pulp and paper sales were impacted by lower volumes as a result of subdued
manufacturing activity. However this volume weakness was offset by
disciplined margin management and strong cost control.
Construction Products volumes were down significantly year on year as this
predominantly New Zealand exposed business was impacted by the weakness in
the New Zealand construction markets.
Fibrelogic
Fibrelogic, the Australian wide diameter pipe manufacturer, continued to
experience tough trading conditions as resource companies and governments put
new projects on hold as a result of the prevailing economic uncertainty.
Through its 50% ownership stake, Nuplex incurred $3.7 million in losses for
the 12 month period. Fibrelogic has been restructured and its cost base
reduced leaving it well placed to win new projects in the future.
Asia
Coating Resins
Sales growth was flat year on year (up 4% at constant currency). Asian
volumes were 4% higher than in the prior year due to the inclusion of
additional Viverso volume. In China, volumes were flat year on year as
economic activity continued to slow relative to the growth rates experienced
over the past decade and resulted in reduced demand for construction related
and Automotive OEM resins.
Pricing actions taken to recover higher raw material costs resulted in steady
unit margins over the period. However, ongoing cost inflation and capacity
constraints at the Suzhou site in China, and for most of the year in Vietnam,
resulted in EBITDA being down 6% (down 2% at constant currency) compared with
the prior year.
Organic Growth
In May 2012, Nuplex doubled its water borne capacity at the site in Vietnam
following the commissioning of the new waterborne plant. The new plant was
completed in line with budgeted costs of US$7.5 million and provides Nuplex
the capacity to continue to be the market leader in decorative paint resins
in Vietnam. In the first full year of operation, the new plant is forecast to
contribute between US$0.5 and US$1 million of EBITDA. Management expect it
will take approximately four years for the capacity to be filled.
In China, the design and internal planning for the new third site at
Changshu, west of Shanghai is complete. The approval process has been slower
than anticipated and Nuplex now expects to commence construction at the end
of 2012. Estimated project costs remain unchanged at US$35 million, and are
expected to be largely incurred during the second half of the 2013 financial
year. Commissioning is planned for December 2013.
Europe, Middle East and Africa (EMEA)
Coating Resins
EMEA sales were up 23% (up 32% at constant currency) and volumes were up 22%
reflecting the six month contribution from Viverso.
Excluding Viverso, sales from the existing EMEA operations were down 6% (up
2% at constant currency) when compared with the prior period. Volumes from
the existing EMEA operations were down 5% year on year as demand from
northern European customers was offset by reduced demand from customers in
southern Europe and lower export sales into the Middle East and Asia.
EBITDA from the existing EMEA operations was largely in line with the prior
year (up 8% at constant currency). In domestic currency terms, earnings from
the existing EMEA operations were higher due to improved unit margins, strong
cost control and further delivery of NuLEAP benefits.
Viverso
Consistent with Nuplex's strategy to build market leading positions and
pursue organic growth in emerging markets, Viverso was acquired from Bayer
MaterialScience. The final acquisition price was EUR69.3 million, and due to
additional working capital requirements and an additional provision for
future pension entitlements, the final acquisition cost was EUR75 million, in
line with the announced acquisition price.
Consolidated as at 31 December 2011, Viverso contributed $10.4 million
(EUR6.3 million) in EBITDA after restructuring costs of EUR0.4 million in the
2012 financial year, exceeding management's EBITDA forecast of EUR5 million.
The integration of Viverso is on track. The operations were renamed Nuplex in
April 2012 and management is focussed on capturing those opportunities
presented by having an on the ground presence in Germany, greater access to
the emerging Central and Eastern European markets and an expanded product
portfolio.
Assuming a continuation of existing market conditions, Viverso is expected to
contribute at least EUR12 million in EBITDA in the 2013 financial year.
Russian JV
During the year, Nuplex entered into an agreement to form a Joint Venture
Agreement with Kvil Group, a Russian paint and resins producer. Initially
Nuplex will invest EUR2.5 million to form a sales and marketing partnership,
as well as investing in some existing plant. It is expected that in 2014,
subject to market conditions, 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 and to satisfy the quality requirements of the growing local paint
companies.
Americas
Coating Resins
Sales were up 3% (up 10% at constant currency) when compared with the prior
year due to ongoing pricing action to recover past period raw material costs.
Volumes were down 2% year on year as the improvement in automotive markets
and the manufacturing sector in the second half of the 2012 financial year
partially offset the weaker first half.
EBITDA was up 11% (up 17% at constant currency) for the year as improved unit
margins were also supported by strong cost control and NuLEAP benefits
focused on improved efficiency and cost reductions.
SPECIALTIES SEGMENT
The Specialties segment consists of two Australian and New Zealand based
businesses, Nuplex Specialties and Nuplex Masterbatch. Nuplex Specialties, an
agency and distribution business, 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.
Nuplex Specialties, the Agency and Distribution business is expected to
contribute approximately 75% of the Specialties segment sales once Nuplex
Masterbatch is included for a full 12 months.
SPECIALTIES SEGMENT
(NZ$ million) SALES REVENUE EBITDA
FY12 FY11 Change (%) FY12 FY11 Change (%)
Actual Currency Constant Currency Actual Currency Constant Currency
TOTAL 305.1 302.2 1.0% 2.1% 20.7 23.4 (11.8)% (10.9)%
Specialties segment sales were $305.1 million up 1% (up 2% at constant
currency) year on year due to the nine month contribution from the acquired
Acquos masterbatch operations. EBITDA was down 12% (down 11% at constant
currency) year on year due to the impact of weaker demand from the Australian
and New Zealand construction and manufacturing sectors.
Agency and Distribution
Sales were down 10% year on year as sales in Australia were down 12% and down
4% in New Zealand. Steady demand for Food & Nutrition products was offset by
reduced demand for those products used in manufacturing processes,
particularly in plastics, coatings and surfactants.
Masterbatch
In October 2011, Nuplex acquired Acquos' masterbatch operations and
integrated them with its existing Culamix operations to form Nuplex
Masterbatch, Australia and New Zealand's leading supplier of colour and
performance additives to the plastics industry. The final purchase price was
A$20.9 million, less than the previously announced acquisition price of
A$23.5 million as potential performance-related benefits were not paid, due
to weaker market conditions experienced in Australia.
Sales and earnings growth over the year reflected the nine month contribution
from the acquired Acquos masterbatch operations. However, the business was
impacted by the deterioration in market conditions experienced during the
year and its EBITDA contribution for the nine months of ownership was
approximately A$1 million. The integration of the two businesses expected to
be completed in first quarter of the 2013 financial year and management is
focused on ensuring that the cost base is optimized. Nuplex Masterbatch
remains on track to deliver EBITDA of approximately A$5 million in the 2013
financial year and in line with the acquisition business case.
FINANCIAL RESULTS
CASHFLOWS
Cash flow from operations declined to $48 million from $60 million in the
prior year, primarily due to working capital requirements in Viverso.
Management continued to focus on working capital. Excluding the impact of
Viverso, the working capital to sales ratio was 15.8%, up slightly from 15.1%
as at 30 June 2011 and still in line with management's target range of
between 15 and 17%. Reflecting the inclusion of 12 months of Viverso working
capital and 6 months of sales, the working capital to sales ratio as at 30
June 2012 was 16.5%.
Stay-in-business capital expenditure for the period was $19.2 million, up
from $12.9 million in the prior year, and equivalent to 84% of depreciation
following the low levels of expenditure spent over the past three years of
65%, 43% and 40%.
Capital expenditure on organic growth projects in Asia was $8.5 million and
is expected to be between $25 and $30 million in the 2013 financial year.
Expenditure on acquisitions was $130.5 million, comprising of Viverso and
Acquos's masterbatch operations.
BALANCE SHEET
Net debt increased to $220 million from $74 million at 30 June 2011 due to
the acquisition of Viverso and Acquos's masterbatch operations during the
year. Net debt to net debt plus equity has increased to 28% from 12% 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
In August 2011, Nuplex completed the renegotiation of its bank facilities
through to August 2014. The facilities were aligned to Nuplex's ongoing needs
and reduced to A$200 million from A$300 million. Nuplex's average funding
cost for the 2012 financial year was approximately 7%, down from 12% in the
2011 financial year.
The bridging facility secured to fund Viverso has been replaced with funds
raised in the US Private Placement market. As previously announced, Nuplex
raised US$105 million of notes maturing in 2019 at a coupon rate of 6.125%.
The funding was settled on 30 July 2012 and converted into Euros.
As announced in June 2012, Nuplex will redeem the NZ$52.6 million of Capital
Notes on 15 September 2012 using funds from existing bank facilities.
ENDS
ALSO ATTACHED TO THIS ANNOUNCEMENT ARE:
* THE FY12 FINANCIAL STATEMENTS
* RESULTS RELEASE PRESENTATION
* ASX APPENDIX 4E
End CA:00226100 For:NPX Type:FLLYR Time:2012-08-17 10:07:48
