Chairman's Report

The Directors are pleased to report an 84 per cent increase in net profit after tax to $48.3 million and a 42 per cent lift in net operating profit to $53 million.

This is a consequence of restructuring and investment strategies put in place over the past three years, and is a pleasing result achieved against a background of escalating raw material and operational costs and of constrained economic growth in many regions of the world.

Revenue grew by six per cent to $1,532 million reflecting higher unit prices, a focus on higher quality business, and volume growth offsetting the impact from the closure of loss-making businesses.

Net debt as a percentage of total tangible assets remained constant at 42 per cent for the year, and net debt as a percentage of total funds employed decreased from 53 per cent to 52 per cent. Senior debt remains in the middle of the Board’s policy range and headroom exists for further development of the Company, although Directors will continue to take a conservative approach to the balance sheet. Former production sites at Seven Hills (Sydney) and Avondale (Auckland) continue to be remediated and the planned sale of these properties has been slowed by the downturn in the commercial real estate market.

The Nuplex of 2007/08 was a very different company from only one year before. Substantial investment in capacity for more environmentally-friendly resins, coupled with closure of inefficient facilities in the UK and Brazil, changed the nature of the Resins business to reflect the needs of today’s markets.

The Specialties group was repositioned successfully through closure of Seven Hills and successful transformation of the business to an agency and distribution model. This reflects the overall change in Australasian markets towards services and away from manufacturing, and the Specialties group now represents 19 per cent of Group profit.

Dividend

A final dividend of 23 cents per share, payable on 17 October 2008, lifts the full year payout to 43 cents, an increase of 19 per cent, and demonstrates the Board’s confidence in the future of the Company. This dividend is fully franked for Australian shareholders, but there are insufficient imputation credits for New Zealand shareholders to receive a benefit or to pay a supplementary dividend to overseas shareholders.

The growth of the business beyond its historical heartland has provided a substantial increase in shareholder returns, while the contribution to Group earnings from New Zealand businesses is falling in both real and relative terms due to a shrinking industrial base. Reduced tax payments and a 76 per cent increase in dividends over the past four years have eroded imputation credits, and irregular, partial imputation of dividends for New Zealand shareholders is anticipated in future.

Shareholders are eligible to participate in the dividend reinvestment scheme. The strike price will be calculated as the weighted average sale price of all shares traded on the NZX during the first five of the last eight days prior to 3 October 2008, less a discount of 30 cents per share.

Directors

Barbara Gibson was appointed to the Board on 1 September 2008 as part of the ongoing Board refreshment programme to ensure that the Company has Directors with experience relevant to the future needs of the organisation. Under the terms of our constitution, she retires at the AGM and, being eligible, offers herself for election.

Barbara is well qualified to add value to the Board. She graduated with a BSc from Monash University and has enjoyed a successful career in the chemical industry with ICIANZ, and subsequently Orica, where she was general manager of a major business unit with responsibility for Australia, New Zealand, Asia and Latin America. She retired in 2005. Barbara resides in Melbourne and currently serves as a director of other companies listed on the ASX.

You will also see in the Notice of Meeting that I will retire by rotation and have decided that after a long career in the industry, the last 46 years with Nuplex in one role or another, it is now time to stand down. I will therefore not be offering myself for re-election. The time is right. I am confident that the major initiatives that we have embarked upon in the last few years are now bedded in and, as the Company embarks upon the next stage of its growth, it is important that it is led by a majority of directors who have a minimum of five to ten years’ service ahead of them to see projects through. We have established the nucleus of a strong new generation Board and have recently advised that Rob Aitken, a member since 2006, will be appointed Chairman. As you will see from his CV, Rob is well experienced to lead this dynamic international company. I have every confidence in the Board to take Nuplex forward, maintaining our proud history of growth and service to our stakeholders.

Prospects

The Company is well positioned for future growth. While significant benefits have already arisen from restructuring, repositioning and investment in technology, marketing and capacity, more lie ahead.

For the immediate future, it is expected that the difficult trading conditions encountered in the 2008 year will continue into 2009. There is much talk of worsening global economies and, if this is the case, demand will suffer with some consequences for short-term results. The Board is, however, confident that the experienced team at Nuplex will be capable of managing the business to match these challenges.

Directors will monitor performance through the first quarter to enable a realistic forecast of expected 2008/09 performance to be made as soon as possible.

Staff

The difficult times experienced by the businesses have brought the best out of our experienced and dedicated management and staff. Directors are aware of the effort and focus that have been demanded of everyone as the Company faced significant restructuring and made major capital investments, while coping with steadily increasing raw material costs and uncertain trading conditions.

All management and staff must be congratulated for bringing together such a good result.

Fred Holland
Chairman