Nuplex projects 64% gain in Asia sales by 2018

Nuplex projects 64% gain in Asia sales by 2018 as capacity expansion bears fruit

By Jonathan Underhill

May 25 (BusinessDesk) - Nuplex Industries, which makes resins used in industrial coatings and paint, is forecasting a 64 percent gain in sales in Asia by 2018 as its expansion of plants in China, Vietnam, Thailand and Indonesia bears fruit.

The Auckland-based company expects sales from Asia of about US$400 million by the end of 2018, from US$243 million in 2014, according to a presentation for an investor day in Auckland. It expects double-digit growth in Asian earnings before interest, tax, depreciation and amortisation in 2016 through 2018. The shares fell 0.3 percent to $3.75 and have declined 26 percent this year. The stock is rated a 'buy' based on six analysts polled by Reuters.

Nuplex has been cutting back operations in Australia and New Zealand, where a weaker performance is weighing on growth in Asia, America and Europe. In November it sold its Australasian agency and distribution business Nuplex Specialties and its plastic additives business Nuplex Masterbatch for A$127.5 million to focus on global resins. It used the sale proceeds to reduce debt and is underway with buying back as much as 5 percent of its shares.

As a result, its percentage of sales from the ANZ region, excluding the part-year contribution from Specialties, shrinks to 23 percent in 2015, from 40 percent in 2014, the presentation shows. Asia is forecast to make up 23 percent of sales, compared to 17 percent last year, while Europe, Middle East and Africa climbs to 42 percent from 34 percent and the Americas climb to 12 percent from 9 percent.

In Asia, Nuplex has market leading positions in China in five of its six product lines and ranks number one in both Indonesia and Malaysia in four. Its two-stage strategy for Asia includes spending $60 million in phase one since the start of 2011 to increase capacity by 75 percent. The biggest commitment is in China, including a US$4 million regional research and development centre in Suzhou opened in April 2014 and US$35 million to double capacity at its factory in Changshu, due to be commissioned by mid-2015.

Phase two includes development of a brownfield site at Changshu, and expansion in Vietnam, Indonesia, Malaysia and Thailand, and the first local site in India, the company said.

Nuplex also outlined plans to improve capital management, including reducing the ratio of working capital to sales to between 14 percent to 16 percent, compared to a historic target of 15 percent to 17 percent. The sale of the Specialties and Masterbatch businesses reduced working capital by $60 million, or 1.5 percent of sales, it said.

The company is projecting additional cash flow of about $20 million in cash proceeds from the sale of surplus property in Australia in 2016.

(BusinessDesk)

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