Nuplex considers quitting NZ 

Source: ONE NewsNuplex managing director John Hirst

• WATCH the video (1:40)

Resins and chemicals maker Nuplex says full year operating profit after tax could rise by up to 78%, while it is also considering whether to remain based in New Zealand.

Chairman Rob Aitken told the company's annual meeting on Friday that global business conditions had improved markedly on a year ago.

Sales revenue in most markets appeared to have stabilised, although, except for Asia, at a much lower demand level than a year ago.

With lower raw material costs and benefits from restructuring in the past 12 to 18 months, net profits were strongly ahead of last year, so far, Aitken said.

"Stronger demand and lower costs from our Asian operations have led to a very strong performance from that region, with Asia now having doubled the corresponding last year-to-date profit and is now on a par with Australia as the largest regional profit contributor."

The poor state of trading in New Zealand was a particular concern, he said.

It was partly caused by a relatively worse economic environment, but also due to moves by many traditional customers to lower cost operations offshore.

Nuplex had extensive infrastructure in New Zealand that may be more than it needed in the future.

Managing director John Hirst said the first quarter had been stronger than expected, while October was "very profitable".

While full year results would depend on a range of factors, current indicators were that earnings before interest, tax, depreciation, and amortisation would be in the range of $100 million to $110 million.

With low debt that would translate into an operating profit after tax of $36 million to $44 million, up by 48-78% over last year.

Quit NZ?

Aitken also said the board was considering the matter of the company's domicile, with the matter having been raised by shareholders.

"We are mindful that the corporate costs of an expanding global business are presently largely being carried by the New Zealand entity, in accordance with our current domicile and tax legislation," Aitken said.

"Unfortunately, these costs generally offset operating profits generated by New Zealand domiciled businesses, eroding the profit base with the consequence of zero or minimal New Zealand tax payments, and hence an absence of imputation credits.

"Clearly, this is not in the best interests of the majority of our shareholders if it can be avoided."

The board expected to be able to decide in the near future whether the matter was worth further consideration. Ultimately it would be a decision for shareholders.

Last financial year Nuplex had to raise nearly $160 million in new capital to meet debt commitments.

The company reported a 65.4% fall in net profit for the year to the end of June to $16.7 million as it was battered by tough economic conditions. Revenue fell 2.5% to $1.49 billion.

Nuplex shares were up 10 cents to $2.50 in late morning trade.

November is economy month on TVNZ 7

Spotlight on the Economy kicks off on November 3 with a look at National's first year in government. We want to hear from you ....

Tell us your thoughts about the economy, how the recession has affected you and any message you'd like to say to the government. Your comments could appear during the debate. Submit a question here.