Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Nuplex cut to ‘hold’ at Craigs on Australia downturn

Nuplex cut to ‘hold’ at Craigs on steeper-than-expected Australian manufacturing downturn

By Suze Metherell

March 26 (BusinessDesk) – Nuplex Industries was winded by a steeper-than-expected cyclical downturn in Australia’s manufacturing sector, says Craigs Investment Partners, which cut the specialty chemicals manufacturer to ‘hold’ from ‘buy’ following its first-half results.

The market in Australia and New Zealand has undergone “a structural change” since 2010, as Nuplex’s high margin customers, in packaging adhesives, textiles and inks, reduce production in response to a manufacturing that’s trimming local output in favour of importing finished goods, Craigs analyst Dennis Lee said in a report.

He said there was a risk of “further escalation in restructuring costs if more drastic changes are necessary to contain Australia and New Zealand earnings leakage.”

“The cyclical downturn particularly in Australia was steeper than expected and this has accelerated the speed of structural reform in the manufacturing sector,” Lee said in the note titled “First-half 2014 post-result review – Australia still a drag”.

First-half earnings for the Auckland-based company showed sales from its main resins business in Australia fell 20 percent. Sales in Australia have been further crimped by the 18 percent gain in the kiwi dollar against the Australian currency over the past 12 months

The Australian Industry Group's Performance of Manufacturing Index, a private gauge of activity in the sector, contracted for a fourth month in February. The industry group called for increased competitiveness and productivity if the economy was to “find new sources of growth as the boom in mining investment wanes”.

The Australian PMI index stood at 48.6 last month, on a scale where a reading below 50 signals contraction. The same New Zealand measure, the BNZ-BusinessNZ PMI stood at 56.2 for February, and has been expanding for 18 consecutive months.

Last month Fletcher Building, New Zealand’s largest listed company, described Australian conditions as soft. It reported a 27 percent decline in its first-half Australian earnings, which account for half the company’s business. A 1 percent gain in sales in Australian dollar terms translated to a 10 percent decline to $1.7 billion, once converted back to the kiwi dollar.

The Auckland-based building company said the outlook for Australian commercial construction remained subdued, with low state government spending on infrastructure, while the mining activity looked “depressed”.

Nuplex shares were unchanged at $3.60. They are rated ‘hold’ by four out of six analysts surveyed by Reuters, with an average target price of $3.65. Fletcher shares, which are also rated ‘hold,’ fell 1.4 percent to $9.48, according to Reuters, with an average target price of $9.42.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Warming: Warming Signs From State Of Climate Report

Climate data from air, land, sea and ice in 2013 'reflect trends of a warming planet' -- says the latest State of the Climate report, launched by U.S. and New Zealand scientists. More>>

ALSO:

Scoop Business: Embrace Falling Home Affordability, Says NZIER

Despair over the inability to afford a house is misplaced and should be embraced as an opportunity to invest in more wealth-creating activity, says the principal economist at the New Zealand Institute of Economic Research, Shamubeel Eaqub. More>>

Productivity Commission: NZ Regulation Not Keeping Pace

New Zealand regulators often have to work with out-of-date legislation, quality checks are under strain, and regulatory workers need better training and development. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news