news report

Nylex sell-off continues
From: By Andrew Trounson
November 26, 2005

DIVERSIFIED manufacturer Nylex is poised to finally sell its $30 million automotive trim business to raise funds needed to develop its water conservation products as its other businesses battle subdued consumer demand and faltering car production.

The sale, expected to be completed before the end of the year, will mean further job losses in the already hard-hit South Australian and Victorian auto components sector. However, a sale can't come too soon for Nylex.
Yesterday, Nylex shares plummeted more than 30 per cent to a three-year low after chairman Ray King warned that tough market conditions would cut full-year pre-tax earnings by 30-40 per cent from $34.7 million in 2004-05.

The shares had recently been supported by speculation of a takeover or a management buyout. However, management has ruled out a buyout and Nylex's problematic spread of assets is seen as discouraging bidders.

Nylex's signature hose and hardware sales have been hit by poor consumer sentiment while its auto parts business, which also includes fuel tank and carpet moulding businesses that it wants to retain, is suffering as local car makers cut production in the wake of high petrol prices and sagging demand for big cars.

"The anticipated normal acceleration of Nylex brand sales during the build-up to Christmas has as yet failed to materialise," Mr King told shareholders at the annual meeting.


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Nylex's wheelie garbage bin operation has also been hurt by cheap imports from Malaysia and Singapore at prices below Nylex's manufacturing costs. But that competition should ease in the second half after Nylex appealed to customs alleging the Asian wheelie bins are being dumped at illegally low prices. The threat of a customs action had led to a return to more normal pricing, chief executive Glen Casey said.
Nylex is selling its plant hire business to National Hire Group for $111 million, and, combined with money from the sale of the auto trim business, the proceeds will provide Mr Casey with an acquisition kitty of $40-$50 million as the company looks to focus on fewer, higher-return businesses, particularly water recycling.

Mr Casey said he was doing due diligence on two "exciting opportunities". He said acquisitions could be made early in the new year and would provide earnings upside to forecasts.

Despite tough market conditions, debt last year was cut by 37 per cent to $140 million and the balance sheet further strengthened by the plant hire sale.

"We are going to be in the best position we have been in, in five years," Mr Casey said.

But the market isn't convinced, Nylex shares dropping 7c to 16c. "They have sold their star profit contributor (plant hire) for a fairly unimpressive sum, management is under pressure to find accretive acquisitions and the company is facing strong economic headwinds," Ord Minnett analyst Nick Gregan said.