Investors in Australia caught up with the downgrade from NZ based chemical group Nuplex (NPX) yesterday, and the shares dropped more than 6%.
They ended trading in Australia at $2.90, down 5.8%, after the dropped 5.5% in New Zealand on Tuesday afternoon after the downgrade was made public.
Blaming increased competition in the key Australian market, the company said it had lowered its estimated 2013-14 earnings before interest, tax, depreciation and amortisation (EBITDA) to a range of $NZ121million to $NZ125 million, compared with the earlier guidance of $NZ130 million to $NZ145 million.
That’s a possible profit fall of up to 14%.
The company said the updated guidance range continues to include net costs of $2.4 million associated with implementing the re-organisation of its Australia and NZ business (ANZ) announced in February 2014.
"Net profit after tax (NPAT) attributable to equity holders of the parent company for the 2014 Financial Year, is expected to be of a similar level to what it was in the prior financial year, subject to any end of year accounting adjustments," the company said in the statement to the ASX.
Nuplex blamed what it termed "A weaker performance from ANZ in May and for the balance of the year as a result of further weakness in Australia. ANZ EBITDA will now be down approximately $4 million when compared to previous expectations”.
"This revised forecast is being made following the May result which was impacted by margin pressure in coatings resins and the agency & distribution business, as well as adverse product mix in Masterbatch. Whilst volumes have been in line with expectations, management expects the margin pressures to continue.
"When compared with the prior financial year, Nuplex expects ANZ Resins segment EBITDA to be down between 35 and 40% and the Australian and New Zealand focused Specialties segment EBITDA to be down between 45 and 50% primarily reflecting margin pressure in both segments.
"In Europe, trading conditions have been better than management’s expectations and improved over the past four months. Europe, the Middle East and Africa (EMEA) EBITDA is expected to be up between 15 and 20% year on year in local currency.
"Asia has performed in line with management’s expectation for steady growth and EBITDA is expected to be up between 10 and 15% year on year in local currency.
"In the Americas, the business had been on track to deliver modest growth in EBITDA. However, following a recent loss of tolling volumes, EBITDA is now expected to be flat year on year in local currency," the company said in yesterday’s statement.
NPX 1Y – Nuplex shares sold off after its larger downgrade
Directors said the company is confident it can maintain the dividend for the 2014 Financial Year in line with the prior year, given the underlying business performance and cash flow outlook for the next 6 to 12 months.
Nuplex CEO Mr Severin said in the statement, "It is disappointing to see the impact of ANZ’s unexpected weaker performance, including the accounting adjustments, more than offset the improvement in EMEA and the steady growth in Asia. This is particularly so given May and June are historically strong trading months in Australia."
