Annual Report 2010 - NZX Research Centrecompanyresearch.nzx.com/reports/nz/2010/NPX2010.pdf · 31 Financial Report The 2010 Annual General Meeting of Nuplex will be held at 10am,

Annual Report 2010

Directors’ report

Nuplex distributes a range of high-end products used in the cosmetics and personal care industry.

Cosmetics

Nuplex manufactures resins and gelcoats used in boats, surfboards and swimming pools.

Surfboards, boats & swimming pools

Nuplex Resins are used in adhesives for carpet backing and underlay.

Carpet

Nuplex resins and specialty chemicals are used to protect and enhance some of our most valuable assets and are ingredients in products we use every day.

Nuplex iNdustRies limited

Nuplex manufactures UV-stable and dry-clean resistant emulsions used in coating textiles to make soft furnishings.

Curtains and blinds

Directors’ report

12010 ANNuAl RepoRt

Nuplex is a leading producer of resin for coatings used in the timber and furniture industries.

Furniture coatings (timber)

Tissue producers in Australasia rely on Nuplex resins to add wet strength to tissue substrates.

Tissues

A leading supplier of high performance resins used in paint on new and refinished vehicles.

Automotive

Nuplex manufactures resins for metal coatings.

Metal

Nuplex is a leading supplier of high-end flooring solutions in New Zealand.

Flooring

Nuplex distributes and manufactures surfactants used in hair care products in Australasia.

Shampoo

Paper production in Australasia relies on Nuplex’s process and functional chemicals to provide strength and finish. Resins are also used in colour printing ink.

Magazines

agm Notice

coNteNts

3 Highlights 20104 Chairman’s Report 6 Chief Executive Officer’s Report 8 Business Overview17 Safety, Health and Environment Report 20 Board of Directors22 Nuplex Executive Team24 Corporate Governance31 Financial Report

The 2010 Annual General Meeting of Nuplex will be held at 10am, Wednesday, 3rd November 2010 at Waipuna Hotel and Convention Centre in Auckland.

Nuplex is a primary distributor of chocolate to food manufacturing companies in Australasia.

Chocolate

Nuplex is a global leader in resin technology used in paints and surface coatings for residential and industrial applications.

Paint

Nuplex iNdustRies limited2

maNufacturiNglocatioNs

australasia: 12 mANufActuRiNg plANts

resiNs & specialties

resiNs

resiNs

resiNs

AuSTrAliA1 Sydney2 Melbourne3 Brisbane4 Perth5 Wangaratta

ThAilAnd4 Bangkok

ChinA5 Suzhou6 Foshan

neW zeAlAnd6 Auckland

uniTed STATeS1 east St. louis 2 louisville

uniTed kingdoM1 london

neTherlAndS2 Bergen op zoom

vieTnAM1 ho Chi Minh City

MAlAySiA2 Malacca

indoneSiA3 Surabaya

1 21 2

4

3

15

26

3

41

5

2

6

asia: 6 mANufActuRiNg plANts

europe: 2 mANufActuRiNg plANtsamericas: 2 mANufActuRiNg plANts

32010 ANNuAl RepoRt

HigHligHts2010

Record EBITDA, operating profit and net profit in Nuplex’s 54 years as a public company

EBITDA up 52% to $139.4 million, driven by recovery in volumes, tight margin management and restructuring benefits

Net profit after tax up 284% to $64.2 million

Operating cash flow of $104.7 million and lower ratio of working capital to sales, led to a stronger balance sheet

Dividend of 21 cents, up from 8.5 cents

Continued towards goals of zero harm to people and the environment

(in $mil)ebitDa

13992

12210410306

07080910

(in $mil)operatiNg profit

7224

5338

350607080910

(in $mil)reveNue

0607080910 1460

14941532

14521301

(in $mil)Npat

0607080910 64

1748

2662

All figures in this report are in NZD unless otherwise specified.


cHairmaN’s reportrob aitkeN

This was a record year for Nuplex. The strong recovery we reported for the first half, which resulted from our markets improving, ongoing restructuring, and effective margin management, continued for the remainder of the year.

While reported sales revenue in New Zealand dollars, at $1,459.9 million, was marginally below the previous year, total revenue in local currencies was higher, with strong performance in Asia and Europe. Sales volumes of manufactured resins increased by 11 per cent.

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 52.3 per cent to a record $139.4 million, after non-recurring costs of $9.2 million principally related to restructuring. As was the case with sales revenue, reported earnings were affected by the strength of the New Zealand dollar compared with the previous year.

Net profit after tax, at $64.2 million (2008/09: $16.7 million), was also a record in Nuplex’s 54 years as a listed company. This was after unusual items totalling $7.2 million, compared with $6.9 million the previous year. Net interest, including facility fees and the cost of interest rate swaps, was $18.9 million, in line with the estimate at the half year; the cost of funding is expected to decline in future years. The company’s tax rate was 23 per cent compared with 30 per cent the previous year, benefitting from the significant proportion of earnings in Asia and utilisation of tax losses in China that had not been recognised previously.

Operating cash flow was $104.7 million (2008/09: $123.2 million), with continued focus on working capital management resulting in a lower ratio of working capital to sales. Gearing (net debt to net debt plus equity) fell to 12 per cent from 20 per cent at 30 June 2009, due to the strong operating cash flow and relatively low expenditure on acquisitions and capital equipment. Bank facilities were extended until March 2012 and covenants were reset. The company is in compliance with all covenants.

Earnings per share increased to 34.0 cents from 28.0 cents, and your directors have declared a final dividend of 11 cents, which will be paid on 8 October 2010. This will bring total dividends for the year to 21.0 cents, compared with 8.5 cents for 2008/09 and representing 56 per cent of operating profit after tax. The final dividend will be franked to 40 per cent for Australian shareholders, but will not carry New Zealand imputation credits. The dividend reinvestment plan remains in place.

As Nuplex’s financial performance has improved, investors have become increasingly confident of the company’s prospects and the share price has risen considerably over the past year. Significantly, the percentage of shares held in Australia has increased to 18.4 per cent from 13.3 per cent in May 2009.

boarD aND maNagemeNtOur board has an excellent balance of skills, experience and industry knowledge for the proper governance of the company. The directors work well together, and I thank them for their valuable counsel during the past year. As mentioned in last year’s report, we have been joined by Peter Springford, who was appointed an independent non-executive director in September 2009, bringing a wealth of business and international management experience. In line with our board succession program, we will continue to refresh board membership on a regular basis.

John Hirst retired from Nuplex at the end of June, following 43 years with the group, including nine years as group managing director and CEO. I would like to thank him on behalf of all shareholders for his enormous contribution to the company, driving its transformation through organic growth and acquisitions into a significant global resins group. It is appropriate that in John’s final year the company should produce a record profit, reflecting operational excellence and a strong culture of customer service.

I am delighted to welcome Emery Severin, who succeeded John as managing director and CEO on 23 April 2010. Before joining Nuplex, he was president of Boral Industries, Inc. based in Atlanta; earlier he was a senior executive at BHP and Boral and a Rhodes Scholar at Oxford University, where he obtained a doctorate of philosophy in physical chemistry. Emery has extensive experience of building international businesses through organic growth and acquisitions and the board is confident that, with his strategic and commercial skills and proven leadership in competitive environments, he is ideally suited to lead Nuplex during its next phase of growth.

We continue to review the group’s remuneration practices, particularly for directors and senior executives. A significant proportion of senior executives’ remuneration is ‘at risk’,

Training Nuplex staff in Suzhou, China

52010 ANNuAl RepoRt

dependent on both the short-term and long-term performance of the company, and shareholders will be asked to approve a new long-term incentive plan at the annual general meeting in November.

In April 2010, the New Zealand Securities Commission announced that it intended to issue proceedings against Nuplex and certain past and present directors alleging non-compliance with the company’s continuous disclosure obligations in 2009. We believe we acted in accordance with applicable laws, stock exchange listing requirements and accepted commercial practice and will defend our position vigorously. During a period of unprecedented market turmoil, shareholder interests were preserved. These interests will be damaged by the current legal action, and the company estimates it will incur legal defence costs of over $1.3 million.

HealtH, safety aND tHe eNviroNmeNtThe welfare of our people and care of the environment is a key priority in every Nuplex business, and during the year the board established a committee to oversee the development of health, safety and environmental programs and compliance with all legislation and regulation. Our goal is zero harm to our people and the environment in which we operate, and I am pleased to report that the lost time injury frequency rate (LTIFR) fell to 2.1 lost time injuries per million man hours worked, a 38 per cent reduction compared with 2008/09, with no lost time injuries at 18 of our 22 manufacturing sites. Regrettably, there was an increase in total reportable injuries, and we are determined to reverse this in the current year.

There was significant progress with reducing the group’s environmental impact, with our greenhouse gas emission rate continuing to fall and reductions in our energy and water consumption rates. The board will continue to monitor actions that have been taken to prevent a recurrence of two spills that took place during the year.

Nuplex’s DomicileFollowing detailed consideration, your directors are coming to the view that a change of the company’s domicile to Australia, with listings remaining on both the New Zealand and Australian exchanges, would be in the best interests of all shareholders. This would likely result in the payment of partially imputed dividends for New Zealand shareholders, greater liquidity in the larger Australian market and, we believe, a possible re-rating of Nuplex shares over time. Greater access to the Australian capital market would also facilitate the group’s growth plans.

Nuplex’s peRfoRmANce demoNstRAtes the iNHereNt streNgtH of its core busiNesses, customer relatioNsHips ANd global market positioNs

We are continuing to evaluate the structure and timing of any change and will provide an update at the annual general meeting.

coNfiDeNce iN future growtHNuplex has made great progress in the past 18 months. The company has a strong balance sheet, sound cash generating businesses and sustainable earnings based on volume growth and cost control.

The past year was challenging for our management and staff in all regions, and I thank them for their dedication and contribution to the group’s record result. We have a great team, which can be proud of its achievements and will underpin our future.

Our operations span developed regions, where we have established market positions, as well as the fast-growing countries of Asia which offer substantial potential. Our focus now is on investing in growth opportunities, both organic and through acquisition. These will include increasing capacity in certain markets, particularly China and Vietnam in the short term, and penetrating new and existing markets with products based on exciting new technologies.

While demand is significantly stronger than a year ago, Nuplex’s performance in 2010/11 will depend upon economic activity in our markets, and I am confident that our group is well placed to prosper as economic conditions improve.

Rob Aitken Chairman


cHief executive officer’s reportemery severiN

Having been appointed in April 2010, I have spent my first few months at Nuplex gaining a thorough understanding of our businesses in all of our regions. I have been impressed by the energy and dedication of our team in steering the company through its toughest period. Nuplex’s record profit in 2009/10 represents one of the most significant achievements in our company’s history – a testament to the proactive stance that management adopted more than a year ago to counter the global financial crisis.

Raw material prices, the largest cost input to our business, were extremely volatile during the year. In the first half, prices generally dropped and we adjusted our selling prices down accordingly. In the second half, raw material prices increased substantially, however good margin management enabled us to recover most of these increases. Overall our margins improved during the course of the year to more acceptable levels.

In 2008/09 Nuplex also embarked on a program to restructure and re-capitalise the business; this continued through last year, with our managers looking to enhance every aspect of the company’s operations. The results included cost savings across all businesses, strong cash flow, lower working capital as a percentage of sales and a significant reduction in debt.

Nuplex’s global footpriNt – a platform for growtHNuplex’s performance demonstrates the inherent strength of its global market positions. Our strategy of diversifying into new territories and market segments through innovative new products helped us to withstand the worst of the downturn.

Sales volume in our resins business was up significantly on the prior year. The proportion of sales volume in Europe and Asia increased, although their share of revenue remained in line with the prior year due to the translation impact of the strong New Zealand dollar. South-east Asia and China recorded another stellar year. Nuplex’s products will continue to be key ingredients in the region’s rapid industrialisation. Most of our markets experienced a pick-up in demand in 2009/10, although sales volumes have yet to return to previous highs.

Earnings in local currencies were higher in all four regions – Australasia, Asia, Europe and the Americas. Corporate costs have been allocated to Australasia only.

Nuplex’s unique global footprint, sound balance sheet, low gearing and strong cashflow positions us well to invest in organic growth in Asia through new product development, and through value-creating acquisitions.

customer-focuseD tecHNology – our core streNgtHOur commitment to meeting our customers’ changing needs remains a core Nuplex strength. Our customers are facing competitive pressures, as well as tighter legislation amid requirements for environmentally friendly products. About 80 per cent of our technology investment is directly focused on our customers through fundamental research, new product development and direct technical support. As an example, during the year we developed new composite materials and gel coats with reduced styrene content, thus reducing volatile emissions; and a water-based polymer in Australia for interior wall paint with low odour and enhanced performance. New products were also introduced in Europe to meet the stringent new standards introduced in the European Union in January 2010.

In many industrial markets, customers are using Nuplex technology to boost productivity. Our ultra-fast curing acrylic resins system is helping vehicle refinishers in the United States to increase their throughput, while a related product has been adapted for use in Europe.

safety, HealtH aND eNviroNmeNtNuplex came a step closer in 2009/10 to achieving our aim of zero harm to our employees, our customers and the environment, as can be seen from the charts in the safety, health and environment section of this annual report. We are continuing with our training program and instilling a culture of awareness throughout the company, with a particular emphasis this year on reducing medically treated injuries.

our peopleWe strengthened our team with a number of key management appointments in the year. Rob Harmsen was appointed chief operating officer, resins; Sam Bastounas became our chief operating officer, functional materials and specialties; and Clive Deetlefs joined us as vice president operations following

Quality control throughout Asia and the rest of the world has been an integral part of Nuplex’s value proposition to customers

72010 ANNuAl RepoRt

regioNal ebitDa %

Australia36%

Asia24%

europe25%

Americas10%

nz5%

regioNal sales %

Australia40%

europe24%

Americas9%

nz11%

the retirement of Tony Cooke. In July this year we appointed Paul Davey to the newly created role of vice president human resources, and Hasan Shafi to the role of vice president corporate development and planning.

streNgtHeNiNg tHe busiNessCompared with where we stood 18 months ago, there is no doubt that Nuplex has come through the worst of the economic downturn in better shape. Looking back, the Global Financial Crisis was a unique opportunity for the company to restructure its operations and reposition the business.

On the back of the work we have already begun, we have embarked upon a program focused on sustaining and improving margins. Following the completion of a rigorous business diagnostic, to be conducted early in the new financial year, we will deploy a structured operational improvement and excellence program throughout the company over the next 18 months. This program has been named NuLEAP. The focus will be on improving sales, operations, logistics, network efficiencies and capacity in a sustainable way. Besides improving our margins, a key outcome will be to deliver better performance to our customers through security of supply and quality enhancements.

outlookLooking forward, markets remain uncertain, and we are positioned to respond to changing circumstances. However, we expect the pace of any upturn to be mixed across our regions. Asia continues to be the standout performer while the Australian economy appears to be sound. Europe and the Americas remain in a recovery phase.

I thank our managers and employees for achieving a remarkable turnaround. As a result of their professionalism and hard work, and of those who went before, it was a privilege for me, as your new CEO, to be handed the reins of a company in such good health. I am confident that Nuplex can look forward to a successful 2010/11.

Asia16%

Emery Severin Chief Executive Officer

A stroNg balaNce sHeet, souND casH-geNeratiNg busiNesses ANd sustaiNable earNiNgs positioN Nuplex well foR vAlue-cReAtiNg gRowth oppoRtuNities

Directors’ report


(in $mil)sales

0910 1,170

1,190

(in $mil)ebitDa

0910 120

74

Nuplex is a global leader in the supply of resin solutions for use in the vehicle refinish markets worldwide

92010 ANNuAl RepoRt

busiNess overviewresiNs

australasiaResins Australasia includes the coatings, composites, paper and construction products businesses.

We experienced flat sales volumes in Australasia, with a modest improvement in Australia offset by a decline in New Zealand due to weak economic conditions. Profit, however, improved substantially. We embarked on an aggressive program to cut costs. We also drove our innovation agenda much harder, which contributed to the region’s satisfactory earnings.

The Australian market was buoyed by a healthy property market and the return of a degree of confidence among industrial markets. The business also benefited from a high level of take-up of our new technology, which is a key part of the longer-term growth plan for the region. Nuplex launched a number of innovative products in the year to reduce our reliance on traditional products and markets. These included low-volatility water-

dispersed alkyds used in water-based road markings, and ambient crosslink technology.

Our overall performance in New Zealand was subdued amid the prolonged economic recession and low housing starts.

Exports from Australasia grew during the year, mainly to support our Asian businesses. The strength of the Australian and New Zealand currencies limited export opportunities, but demand for our high-performance water-based products boosted export orders to China and elsewhere in Asia. Many of these products were supplied out of New Zealand.

The composites business – a significant contributor to Australasian earnings – suffered the most as a consequence of the economic crisis as many of the end-products are discretionary purchases. This business makes a broad range of structural resins that are used along with glass fibre and other performance fabrics and auxiliaries to create laminates for the construction of swimming pools, boats, surfboards and large diameter pipes.

Government spending on infrastructure projects such as desalination plants and potable water pipelines led to increased demand for high-end corrosion-resistant composite products.

The composites market, which has been slow in the past to adopt new technology, underwent a shift in 2009/10. There was increased acceptance of new techniques such as infusion, which lowers styrene emissions and improves the quality of the product. In anticipation of tightening regulation around styrene emissions, we also made considerable inroads in new styrene-free technology platforms.

The paper business services the Australasian paper and tissue industry with proprietary and non-proprietary manufactured and re-sale products. The business had a strong year, driven mainly by new products and the development of innovative options for our key customers. The market for paper products is undergoing a resurgence, boosted by new investment.

Sales were flat for the construction products business, the smallest contributor to the Australasian resins portfolio.

asiaAsia was again a powerful growth engine – sales grew 25 per cent and EBITDA increased 62 per cent in US dollar terms.

We saw strong volume growth in South-east Asia and China fuelled by domestic demand for consumer durables and by buoyant construction activity.

Our operations in China performed extremely well on the back of a strong economy and, in particular, a robust automotive OEM industry. There was some slowing in the rate of growth in the fourth quarter as the government began to rein in the economy.

Volumes in South-east Asia recovered to pre-crisis levels, particularly in Vietnam and Malaysia. In Indonesia, our composites business gained momentum following its difficult start-up.

Most of our Asian businesses are operating at or near full capacity. Our strategy is to grow our Asian business by building capacity in Vietnam and China and introducing new products.

The ability to deliver product in bulk minimises the costs of logistics and creates efficiencies

A stroNg volume recovery iN euRope ANd coNtiNuiNg growtH iN asia, comBiNed with ouR iNNovAtioN ANd ReceNt RestRuctuRiNg, Resulted iN recorD earNiNgs


busiNess overviewresiNs continued

ouR Result hAs giveN us coNfideNce to iNvest iN proDuct DevelopmeNt aND maNufacturiNg capacity to meet customeRs’ chANgiNg Needs

Resins reactor at Bergen op Zoom

112010 ANNuAl RepoRt

(in $mil)reveNue

(in $mil)ebitDa

07 08 09 100

200

400

600

800

1000

Americas (usd)

europe (euR)

Asia (usd)

Australia & nz (Aud)

10

0

20

30

40

50

60

70

80

07 08 09 10

Americas (usd)

europe (euR)

Asia (usd)

Australia & nz (Aud)

europeOur European operations saw a significant turnaround in the year, driven by recoveries in core markets including automotive OEM, vehicle refinishing and metals. Volumes increased by more than 15 per cent, although they still lag pre-recession levels.

The effects of the global financial crisis in Europe were mixed throughout the region, with the impact more acutely felt in the southern, central and eastern countries where we have limited exposure. The upturn in our core markets of Germany, France and the Benelux countries was spurred by domestic stimulus and export growth to Asia.

In January 2010, EU legislation was introduced limiting the use of volatile organic compounds (VOCs). In anticipation of this change, new products were developed which were introduced during the year. These high-performing products enabled us to increase margins and offset potential volume loss.

In response to the global financial crisis, the European operations were restructured, with the Netherlands government assistance. This has now been substantially completed and we have an efficient structure for the future.

americasOur American business recorded significantly improved profitability in 2009/10 as we benefited from the full impact of the restructuring in the previous year and improved operational efficiency and product mix. Sales, however, were flat as uncertainty over the United States economy weighed on volumes, which were still well below pre-recession levels. Our focus is on specialty markets such as the automotive OEM and the vehicle refinish industry.

Volumes in South America increased, with an improved product mix.

Dispatching goods to our customers

Directors’ report


(in $mil)sales

0910 290

304

(in $mil)ebitDa

0910 20

18


busiNess overviewspecialties

The Specialties business consists of Nuplex Specialty Products (NSP) and Culamix. NSP sources and re-sells products used in a wide variety of industrial and high-compliance markets across Australasia through the APS, Multichem and Polychem businesses, while Culamix manufactures masterbatch and liquid colour products.

The business contributed about 14 per cent of group earnings. The business delivered a 9 per cent increase in EBITDA in 2009/10, mainly through enhanced margins, reduced costs and efficiency gains. This result was achieved even as sales dropped by 4.4 per cent.

Specialties employs the same selling strategies as Nuplex’s Resins business and requires the same technical skills to service diverse markets. These include plastics and rubber, food and nutrition, pharmaceutical and healthcare, industrial and institutional cleaning, agricultural products, surface coatings, and general industrial markets.

Nuplex specialty proDuctsOur NSP businesses are the agents and distributors for a group of principals from around the world that do not have the critical mass to have their own presence in Australasia. NSP leverages its size and scale, and strong compliance and technical expertise, to offer a complete range of complementary products in industrial and high-compliance markets on their behalf.

Sales were hampered by supply-side constraints in the second half, particularly in Asia where demand recovered quickly. In China, resurgent demand for commodity plastics severely restricted access to products.

NSP has embarked on an innovative program to import liquid chocolate for a number of major customers in Australasia.

In March 2010 NSP acquired Med-Chem Ingredients, which has operations in Australia and New Zealand. The acquisition included complementary agencies in the food ingredients market, with excellent prospects in the healthcare, pharmaceutical and paper markets. Med-Chem has performed according to our expectations.

Our focus is to identify opportunities for further expansion, including in agriculture, food and beverage, mining, oil and gas, and packaging. Developing these opportunities will form a key part of NSP’s strategy in the year ahead.

culamixCulamix has masterbatch plants in Australia, New Zealand and Vietnam. The business grew sales strongly across all market sectors. Packaging, rotomoulding and synthetic building materials did particularly well. We underscored our commitment to our Asian operations by rebuilding our Vietnam factory, which saw a return to pre-incident levels of production in the year.

speciAlties is ouR AgeNcy ANd distRiButioN BusiNess. while sAles weRe flAt iN 2009/10, profit iNcreaseD as margiNs improveD ANd beNefits floweD from restructuriNg

The masterbatch plant in Vietnam – a modern and efficient facility

Nuplex is a leading supplier of chocolate to the food industry in Australasia

Directors’ report



busiNess overviewtecHNology

Investing in research and development is core to our strategy. Through new technology we can offer higher-value products that improve performance, speed up productivity, and help our customers keep pace with tightening environmental legislation. Expanding our range of innovative products means that we can maintain Nuplex’s leadership position in our existing markets, while at the same time compete in emerging markets.

Nuplex has invested in a strong R&D presence across our global footprint, with more than 150 technology staff based at innovation centres worldwide. At our innovation centre in Wageningen in the Netherlands we have specialist departments that carry out long-term research in colloid science and bio-based chemistries. New products are developed at our regional centres in Bergen op Zoom in the Netherlands, Louisville in the United States, Sydney, Australia and Auckland, New Zealand, while a number of technical facilities service local requirements in Indonesia, Malaysia, Vietnam and China.

Our innovation program is driven by two main factors – the requirement for environment-friendly products, and demand for high-performing industrial applications that boost productivity and enhance quality.

tecHNology for a sustaiNable futureEnvironmental R&D activities range from researching new raw material for improving product sustainability to developing systems that reduce harmful emissions and chemicals.

At our innovation centre we are researching resins with a lower carbon footprint, while maintaining durability and performance. Examples of environmental developments include a water-based polymer launched in Australia during the year for an interior wall paint with lower

odour and enhanced performance, while in Europe high solids coating resins were introduced to reduce VOC emissions.

Low-styrene emission gelcoats and laminating resins, such as Nuplex’s Aquaguard Pool range, help minimise harmful chemical losses into the atmosphere during the composite production process. Aquaguard still retains the market-leading UV and chlorine-resistant properties for which it is known.

eNHaNciNg performaNce tHrougH Nuplex iNNovatioNNuplex has developed specialist expertise in performance-enhancing resins, ranging from scratch-resistant furniture coatings to enhanced car protection systems. We are constantly looking for new ways to make coatings more durable and easier to use, such as decorative coatings that give the painter more time to correct slight imperfections.

In industrial markets, new products such as Setaqua resins are being developed for faster production lines. They have enhanced gloss control to ensure increased quality in the furniture joinery market.

Nuplex’s ultra-fast curing Setalux range of automotive refinish products is helping our customers in the United States and Europe to boost production levels. The resin can be buffed within 30 minutes of application.

Looking for new ways to meet our customers’ evolving needs remains the focus of our R&D effort. We will continue to expand our range of innovative products that improve performance and quality, and which also address environmental and safety concerns.

Resins for wood coatings are an integral part of Nuplex’s global product range

commitmeNt to ReseARch ANd developmeNt is cRiticAl to ouR success; arouND 10% of our workforce are employeD iN our iNNovatioN ceNtres woRldwide

Nuplex innovation is evident in the use of resins in a variety of coloured inks


busiNess overviewtecHNology - case stuDies

thRough New techNology we cAN offeR HigHer-value proDucts thAt improve performaNce, speeD up proDuctivity aND are more eNviroNmeNtally frieNDly to meet ouR customers’ cHaNgiNg NeeDs.

1. setalux ultra-fast curiNg automotive refiNisH system

Setalux 57-2500 is used to increase the pace of production in the United States automotive refinish market. Nuplex was the first resin supplier to introduce ultra-fast technology amid demand for a low-energy product that increases productivity. Setalux 57-2500’s ultra-fast curing action means vehicle clearcoats can be buffed in 30 minutes compared with the industry average of 6-18 hours. The resin offers considerable economic advantages in terms of increased throughput and energy savings, as well as environmental advantages resulting from lower energy demand and the presence of VOC-exempt solvents.

Setalux 1910 BA-75 is a related ultra-fast curing automotive refinish system that was developed to meet increased environmental, health and safety legislation in Europe. The European Union community in 2007 forced paint makers to sell clear coats with a VOC content of less than 420 grams per liter.

2. setaqua waterborNe acrylic DispersioNs for furNiture coatiNgs

Setaqua coatings offer an environment-friendly product for enhancing the appearance of wood furniture and protecting it from everyday wear and tear. Furniture coatings used in Europe were traditionally solvent-borne, which are harmful to our health and the environment.

Driven by environmental legislation, our customers are increasingly taking up Nuplex’s new water-borne technology, with major furniture manufactures across Europe now using Setaqua products both for their local operations as well as at their overseas-based manufacturing plants.

3. aquaguarD low-styreNe gelcoatsTo meet increased demand for environment-friendly composite products, Nuplex has developed a range of low-VOC polyester resins and gelcoats that feature styrene content of less than 28 per cent. In 2010, the first Aquaguard Pool gelcoat was tested successfully at a major swimming pool manufacturer in Brisbane. Emission measurements confirmed a reduction of more than 50 per cent in atmospheric styrene levels, while still maintaining exceptional handling, UV and chlorine resistant properties.


safety, HealtH aND eNviroNmeNt

Nuplex Believes thAt it is the fuNdAmeNtAl Right of ouR employees, coNtRActoRs ANd visitoRs to Be safe iN our workplaces. we Believe thAt our commuNities aND tHe eNviroNmeNt sHoulD Not be aDversely affecteD by our operatioNs aND proDucts.

safety aND HealtHWe have made progress in improving our safety and health record in 2009/10 through increased focus on managing risk and creating a culture of awareness throughout the company.

During the year the board established a committee charged with delivering world-class safety, health and environmental performance. This committee demonstrates the importance Nuplex places on leadership accountability throughout the company.

Lost time injuries (LTI) were lower, with the lost time injury frequency rate (LTIFR) also continuing to fall. Australasia recorded 55 per cent decline in LTIs compared with the previous year, while the United States and European sites were LTI free. Overall, 18 of our 22 manufacturing sites were LTI-free in the year.

Some of the results indicate that more still needs to be done to achieve our over-arching goal of no harm to employees, customers, suppliers, property, the environment, or the community at large. The total reportable injury rate (TRIR) increased, and our goal in 2010/11 is to reverse this trend.

Achieving world-class performance in safety, health and environment requires the involvement of everyone in the organisation and a concerted effort to share knowledge across all operations. Nuplex’s European sites are piloting a program which aims to instil a culture of safety and awareness throughout the organisation, making safe work practices a fully integrated part of everyday behaviour.

IncidentsIn Surabaya, Indonesia, an electrical short sparked a fire in a storage tank. The fire was extinguished quickly using on-site fire monitors and foam. There were no injuries or major disruptions to production. The tank was damaged beyond repair and a nearby warehouse roof suffered significant damage.

The cause of the incident was traced to a non-compliant electrical switch, and audits are being carried out at all of our major operating sites to identify and rectify similar non-compliance issues.

In Louisville, Kentucky, a small quantity of solvent leaked into a sewer after a process reaction water tank overflowed. A number of homes reported odours. The spill was contained immediately, and process improvements have been undertaken to reduce the risk of a repeat occurrence.

In Wangaratta, Australia, up to 10,000 litres of emulsion wastewater overflowed from a storage tank into a neighbouring property. The incident highlighted inadequacies in our shut down procedures, which have since been rectified.

eNviroNmeNt During the year Nuplex carried out a number of activities that reduced our environmental impact.

In Australia we conducted audits at our Botany site to identify opportunities to reduce energy consumption, as part of our participation in the New South Wales Sustainability Advantage Program. The audits will be extended to other sites in 2010/11. Also in Australia, a plastic waste recycling program was rolled out throughout the Culamix group, while the Geebung site in Queensland installed rainwater collection tanks for its cooling towers.

Our Penrose site in New Zealand installed sand and peat filters on its stormwater discharge outlets, reducing the risk of contaminants entering the municipal system. Our sites in the United States, and at Bergen op Zoom in the Netherlands, significantly reduced their water usage rates, while in Malacca in Malaysia we commissioned a wastewater treatment plant.

In Vietnam our site was upgraded to meet certification requirements.

Seven of our sites in China, Malaysia, Indonesia, the United States, the Netherlands and the United Kingdom now have Environmental Management Systems certification to ISO 14001 standards.


safety, HealtH aND eNviroNmeNt continued

loST TiMe injurieS (lTi)

03 04 05 06 07 08 09 10

03 04 05 06 07 08 09 10

03 04 05 06 07 08 09 10

03 04 05 06 07 08 09 10

ToTAl rePorTABle injury rATe (Trir)

energy ConSuMPTion rATe (gj/t)

WASTe generATion rATe (kg/t)

loST TiMe injury FrequenCy rATe (lTiFr)

injury SeveriTy rATe (iSr)

WATer ConSuMPTion rATe (m3/t)

greenhouSe gAS eMiSSion rATeS (tonnes of Co2e/production tonne)

03 04 05 06 07 08 09 100

5

10

15

20

25

30

35

40

0

2

4

6

8

10

12

03 04 05 06 07 08 09 100

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

0.5

1.0

1.5

2.0

03 04 05 06 07 08 09 100

3

6

9

12

15

0

0.05

0.10

0.15

0.20

0.25

0.30

0.35

03 04 05 06 07 08 09 100

5

10

15

20

25

30

0

50

100

150

200

A lost time injury is a work related injury that results in an employee being unable to work for at least one shift.

This is the number of lost time injuries per million hours worked.

This is the sum of LTIs, medical treatment injuries and restricted work cases per million man hours worked.

This is the number of days lost due to LTIs per million hours worked and gives the measure of the seriousness of work injuries and the impact of the ‘return-to-work’ program.

This is the total consumption of energy from natural gas, petroleum fuel oils and electrical power supply per tonne of product produced.

This is the total water used in the process which is not harvested and/or recycled per tonne of product produced.

This is the total waste arising from the operations and which leaves the sites for further treatment and disposal, per tonne of product produced.

This is the total emissions mass produced by the operations, expressed in CO2 equivalents, per tonne of product produced.


Site contaminationsIn 2009/10, Nuplex continued to work on resolutions for legacy ground and aquifer contamination at five sites in Australia and New Zealand and provisions have been made to cover anticipated costs. The program was an important activity throughout the year, and in each case the relevant environmental authorities continue to be involved.

North Clayton: The installation of remediation equipment is expected to commence in late 2010 pending the Environmental Protection Agency’s (EPA) approval of a remediation action plan.

Cheltenham: The findings of an additional soil and groundwater investigation have been included in a report due to be submitted to the EPA in 2010.

Botany: A voluntary management proposal has been agreed with the NSW Department of Environment, Climate Change and Water to delineate off-site contamination and install a remediation system at our Botany site.

Seven Hills: The status of the site was unchanged in 2009/10, with the majority of demolition and remediation work complete.

Avondale: An investigation of soil and groundwater has been undertaken.

compliaNce aND busiNess coNtiNuityNuplex co-operates continuously with regulatory authorities to ensure we can remain in full compliance with local laws, regulations and licensing conditions. All sites maintained their operational certifications in 2009/10.

AsiaIn Asia, we allocated more management resources to address health and safety at regional and local site levels. At our Ho Chi Minh site in Vietnam we installed a foam-enhanced automatic fire protection system to upgrade protection of the site in the event of a fire.

In Suzhou, China, Nuplex was fined RMB 30,000 (NZD$6,250) after a tin oxide used at the site was found to be classified as a poison under Chinese legislation. A licence has now been obtained. At our Foshan site we continued to install equipment required to meet increasing Chinese emission and environmental standards.

AmericasIn the United States, Nuplex was fined US$110,000 (NZ$156,000) by the Louisville Metropolitan Sewer District for a process reaction water loss incident at Louisville. We also received a violation notice for the same incident from the Kentucky Department of Environmental Protection. As a result, the renewal of our discharge permit has been delayed until measures have been agreed to correct the non-compliances.

Also in Louisville, our air-operating permit is in final agency review after we complied with new local authority changes.

AustralasiaIn New Zealand we submitted a compliance plan to meet Emergency Response Management Authority (ERMA) regulations governing bulk tank installations. We expect authorities to issue stormwater and trade waste approval at our Penrose site once ongoing upgrades have been completed. Our Penrose and Onehunga sites are also in the process of renewing their air discharge certificates.

In Australia the company was fined A$5,481 (NZ$6,930) by the Victorian Environmental Protection Agency following a waste water discharge incident at Wangaratta. Corrective procedures have been put in place to prevent a re-occurrence. Also in Australia, we are rectifying our failure to achieve boiler emission stack velocity requirements at Springvale; and in Wacol we are addressing a non-compliance issue following a styrene emission test at our Gelcoat plant.

EuropeNew wastewater discharge processes are being trialled to alleviate odour and phenol levels at our Silvertown site in the United Kingdom.

Testing is being conducted ahead of repairs at Bergen op Zoom after an inspection by the local environmental agency discovered the potential for leakage in the stormwater sewer system.


boarD ofDirectors

rob aitkeNChairman and Independent Director, based in Sydney

Joined the board in July 2006, and became Chairman in November 2008. Rob has over 25 years experience in senior management roles with manufacturing, industrial marketing and distribution businesses in Australia, Asia, North America and Europe. Most recently this has been as Executive General Manager Southcorp Water Heaters and Southcorp Appliances and prior to that as President Formica Corporation. He is a non-executive Director of Rubicor Group Limited and Alesco Corporation Limited. Rob is an ex officio member of the Audit, Remuneration and Safety, Health & Environment Committee.

emery severiNManaging Director and Chief Executive Officer, based in Sydney

Joined the Board as Managing Director and Chief Executive in April 2010. Between 1977 and 1986 Emery was an officer in the Australian Regular Army. After completing a B.Sc. in Chemistry in 1977 at the Royal Military College, Duntroon, he joined the Signals Corps. During this same period Emery was awarded a Rhodes Scholarship and read for a D. Phil in physical chemistry at Oxford University. In 1986 Emery joined BHP Steel initially in a planning and business development role before holding a range of line management positions in Australia and South-east Asia. In 1996 he joined Boral Limited, moving to Executive General Manager of Boral’s Australian Construction Materials Division in early 2000. In 2004 he was appointed as President, Boral Industries Inc based in Atlanta, Georgia with a focus on building Boral’s United States operations through green field developments and acquisitions. In 2007 the focus changed and Emery proactively led Boral’s response to the unprecedented US housing market downturn before returning to Australia to take up his new role at Nuplex.

barbara gibsoNIndependent Director, based in Melbourne

Joined the Board in September 2008. Barbara is a former senior executive with Orica Limited (previously ICI Australia). Her last position was as Group General Manager, Chemicals Group. She has extensive experience in the development of technology based businesses in Australia and overseas. Barbara is a non-executive director of Penrice Soda Holdings Limited and St Barbara Limited, and Chairman of Warakirri Asset Management Pty Ltd. In 2003 Barbara received the Centenary Medal for services to Australian Society in Medical Technology. She is a member of the Australian Academy of Technological Sciences and Engineering. Barbara is the Chairman of the Remuneration Committee and a member of the Safety, Health and Environment Committee.

DaviD JacksoNIndependent Director, based in Auckland

Joined the Board in November 2006. David is a former Chairman and Audit Partner of Ernst & Young. He is an Independent Director of Pumpkin Patch Limited and Fonterra Cooperative Group Limited, and Chairman of The New Zealand Refining Company Limited. He is Chairman of The Dame Malvina Major Foundation, and a trustee of the New Zealand National Maritime Museum. In 1994 David was awarded a Fellowship of the New Zealand Institute of Chartered Accountants. David is Chairman of the Audit Committee.

Rob Aitken Emery Severin David JacksonBarbara Gibson


peter spriNgforDIndependent Director, based in Auckland

Joined the board in September 2009. Peter spent 30 years in the forest and building products industries. He is currently Chairman of Hung Hing Printing Group Ltd, a Hong Kong based listed printing and packaging company, an independent director of The New Zealand Refining Company Ltd and a director of other industrial companies based in China, Malaysia and New Zealand. He is a trustee of The Graeme Dingle Foundation. Peter is the Chairman of the Safety, Health and Environment Committee and a member of the Audit Committee.

micHael wyNterIndependent Director, based in Sydney

Joined the Board in April 1998. Michael is a consultant for the Australian legal partnership of McCullough Robertson. He has broad experience in Australia, Japan and South East Asia and was involved in negotiations for the establishment of our Vietnam plant. He was a Director of Australian Chemical Holdings from 1993 and Chairman from 1995 until its acquisition by Nuplex in 1998. He is one of the Trustees of the Mitsui Education Foundation in Australia. Michael is a member of the Remuneration Committee.

JoHN HirstRetired Executive Director

John joined the Board as Group Managing Director in January 2001 following five years as Chief Executive Officer of Nuplex Industries (Aust) Pty Limited. Prior to transfer in 1995, John had 10 years as General Manager of the New Zealand Resins business. He joined Nuplex in 1967 and had a range of technical and sales roles within the company’s Resins business including secondment to Sydney to develop an Australian Resin business between 1977 and 1985. He is a director of Penrice Soda Holdings Limited. John retired from the Board on 23 April 2010, and left Nuplex on 30 June 2010.

bryaN keNsiNgtoNRetired Independent Director

Bryan Kensington was appointed to the Board in January 1993. Bryan is a retired Chairman of Ernst & Young, Radio New Zealand Limited, the New Zealand Advisory Board of Westpac Trust, Ngawha Geothermal Resource Co Ltd and the Southern Cross Healthcare Group. He is trustee of the Royal New Zealand Yacht Squadron. He was previously a member of the Council of the Institute of Directors and Chairman of the Auckland Branch. In 2004 he was elected as a Distinguished Fellow of the Institute of Directors. Bryan was a member of the Audit Committee. Bryan retired at the Annual Meeting on 6 November 2009.

Peter Springford Bryan KensingtonJohn HirstMichael Wynter


Nuplexexecutive team

Back (left to right): Sam Bastounas, Paul Davey, Rob Harmsen, Clive Deetlefs, Hasan Shafi (Front left to right): James Williams, Emery Severin, Ian Davis

emery severiNManaging Director and Chief Executive Officer, based in Sydney

Please see details on page 20

iaN DavisChief Financial Officer, based in Sydney

Ian joined Nuplex on February 1 2009 as Chief Financial Officer. A Chartered Accountant, Ian has over 30 years experience in public accounting and senior financial roles in commerce. The commercial roles have predominantly been in manufacturing and include experience in Australia, New Zealand, China and the United States. Prior to joining Nuplex, Ian was CFO of Tenix Pty Ltd and before that, General Manager Finance of Rheem Australia Pty Ltd.

James williamsGeneral Counsel & Company Secretary, based in Sydney

James Williams joined Nuplex in March 2009 in the newly created role of General Counsel & Company Secretary. James has over 25 years experience in commercial law and corporate administration, and has worked as legal counsel and company secretary in a number of large publicly listed companies and major corporates. James was previously a partner in a medium-sized law firm in Sydney before leaving private practice to work in-house. James holds degrees in Commerce and Law and is a Fellow of the Institute of Chartered Secretaries in Australia. James brings to the role at Nuplex a focus on legal and regulatory affairs, corporate governance and administration, and regulatory risk management and compliance.


rob HarmseNChief Operating Officer - Resins, based in Sydney

Rob joined Nuplex through the acquisition of Akzo Nobel Coating Resins in 2005. Previously, he held various roles with Akzo Nobel since 1985 before joining the Resins business unit in 1994 as Financial Controller. He was appointed business manager Surface Coatings Resins Europe in 1996. Rob led the growth of that unit in the second half of the 1990s. During that time he was instrumental in setting and implementing the growth strategy for coating resins in Asia. In 1999 he was appointed General Manager Surface Coating Resins and in 2002, after the addition of the sub-business units Powder Resins and Automotive OEM Resins, General Manager Coating Resins. After the acquisition of Akzo Nobel Coating Resins, Rob became the Group General Manager Nuplex Resins. After an extended 4 months stay in Sydney in 2006 he moved from the Netherlands to Sydney on January 1 2007. He was appointed Chief Operating Officer Nuplex Resins in December 2009.

sam bastouNasChief Operating Officer - Functional Materials & Specialties, based in Melbourne

Sam Bastounas was appointed to the position of Chief Operating Officer in 2009. In his current role he oversees all Nuplex operations in Australasia. He has had held a number of roles with Orica and ICI in the past and spent 2 years in Asia as CFO of a joint venture in the late 1990’s. Sam holds a BSc (Hons) in Chemistry and an MBA both from Monash University in Melbourne. In 2007 he completed the AMP at The Wharton School in the United States and in 2009 completed his graduate diploma at The Australian Institute of Company Directors.

clive DeetlefsGroup General Manager Operations, based in Sydney

Joined Nuplex on March 1 2010. Clive is a Chartered Professional Chemical Engineer and also has a bachelor’s degree in Accounting / Business Economics. In addition he is a Certified Six Sigma Master Black Belt. He has 23 years’ experience in senior manufacturing roles including process and project engineering, multi-plant operational management, and regional supply chain operations. He has global experience, having worked in South Africa, UK, Netherlands, United States, Asia, as well as Australia. Prior to joining Nuplex, Clive was the Global Six Sigma and Lean Manufacturing Lead for Monsanto based in the United States.

paul DaveyVP Human Resources, based in Sydney

Paul joined Nuplex in July 2010 in the newly created role of Vice President Human Resources. Previously Paul has held HR leadership positions in multinationals such as Nestle, Glaxo Wellcome and senior consulting roles within Ernst & Young & Mercer. These roles have all had regional accountability - based in Australia, Switzerland, UK and South Africa. Paul has a BA and Post Graduate honours in Business Administration.

HasaN sHafiVP Corporate Development and Planning, based in Sydney

Joined Nuplex on August 9 2010, in the role of Vice President Corporate Development and Planning. Hasan has broad experience in management consulting, R&D, engineering and academia. Prior to joining Nuplex, Hasan was a Principal with A.T. Kearney, a global management consulting firm, in its Sydney office. For over ten years, Hasan consulted to clients in Australia, New Zealand, South-east Asia, China and United States. Hasan has a PhD in Mechanical Engineering from The University of Newcastle, a BSc in Aeronautical Engineering from the Middle East Technical University in Turkey and an MBAE from the Ross School of Business, University of Michigan.


corporategoverNaNce

1. iNtroDuctioNNuplex Industries Limited (Nuplex) is listed on the New Zealand Stock Exchange (NZX) and the Australian Securities Exchange (ASX).

Nuplex has adopted the following governance principles as the benchmark against which it will implement its governance principles and practices:

• The NZX Corporate Governance Best Practice Code

• The New Zealand Securities Commission’s Governance Principles and Guidelines, and

• The ASX Corporate Governance Principles and Recommendations (2nd Edition).

This report contains details of Nuplex’s corporate governance practices.

2. role aND fuNctioN of boarD of Directors

The Board of Directors (the Board) of Nuplex is elected by shareholders to direct and supervise the management of the Company.

The Board establishes the strategic direction and objectives of the Company and sets the policy framework within which the Company will operate. The Board appoints the Managing Director, delegates appropriate authority for the management of the Company, and monitors management’s performance on a regular basis.

Nuplex has formally established the functions reserved to the Board. These are contained in the Board of Directors Charter which is available in the Investor Relations section of the Company’s web site (www.nuplex.co.nz).

3. role aND fuNctioN of seNior maNagemeNtThe Board has delegated to the Managing Director, responsibility for the conduct of the affairs and day to day management of the Company. Delegation is subject to matters reserved for Board approval as detailed in the Board of Directors Charter.

In addition, there are 7 senior executives reporting to the Managing Director who have been delegated the responsibility for managing key areas of the business including: technology, sales, marketing, financial and treasury management, operations and production facilities, raw material purchasing, distribution, strategic planning, human resources, legal compliance, regulatory affairs and corporate secretarial.

The performance of senior executives is reviewed periodically by the Managing Director against appropriate measures set by the Managing Director and the Remuneration Committee relative to the executive’s role.

The Remuneration Committee has oversight in relation to the setting of goals to be achieved by senior executives in connection with both short-term and long-term incentive schemes and monitors the performance of senior executives in relation to the achievement of those goals. In accordance with this process, a performance evaluation for senior executives has taken place during the reporting period.

4. boarD structure The Board is comprised of a majority of five non-executive directors, all of whom are independent directors. The Managing Director, Emery Severin is the only executive director. Non-executive directors are selected to ensure that a broad range of skills and experience is available. Mr Rob Aitken is the current chairman.

The Board meets in accordance with a schedule prepared well in advance of the start of each calendar year, rotating between the Auckland Office and other overseas facilities. This enables directors to become familiar with the Group’s market environment and manufacturing operations and to meet employees. Board meetings follow procedures that ensure that all directors have the necessary information to participate in an informed discussion on all agenda items. Senior managers make direct presentations to the Board on a rotational basis to give the directors a broad exposure to management philosophies, capabilities and the key issues facing the business and actions taken to address them.

Any director is entitled to obtain professional advice relating to the affairs of the Company or to his or her other responsibilities as a director. The full provisions in this regard are set out in the Board of Directors Charter and other Board Committee Charters.

The Board has established that all non-executive Directors are independent after taking into consideration their associations as shareholders of the Company and directors or officers of other organisations. Details of the Directors’ skills and experience, period of appointment and their interests are disclosed on pages 20 and 21 of this report.

The Board has instituted a system to review annually the performance of the Board, its Committees and individual directors. This process involves peer review and one-on-one consultation between the Chairman and individual directors. In accordance with this process, an evaluation of the Board, its Committees and the performance of directors took place within the reporting period.


The Board has held 15 meetings during the year ended 30 June

2010 with attendances recorded as follows:

Name of Director: No of Meetings attended*

R Aitken 15/15

B Gibson 15/15

J Hirst 11/12

D Jackson 15/15

B Kensington 5/5

E Severin 3/3

P Springford 13/13

M Wynter 15/15

(*the denominator indicates the number of meetings held during the period in which the director held office)

5. boarD committeesThe Board has the following standing committees. The Chairman, Rob Aitken, is an ex-officio member of all Board committees.

Nomination Committee At the present time, the full Board constitutes the Nomination Committee. From time to time the Board establishes a sub-committee to carry out the responsibilities of the Nomination Committee.

The responsibilities of the Nomination Committee include the identification and nomination of suitable candidates to fill board vacancies as they arise. The policy and selection process for the appointment of directors include an evaluation of the skills, knowledge and experience of current directors, an evaluation of the competencies required of prospective directors and the evaluation of prospective candidates against these requirements.

A description of the procedure for the selection and appointment of new directors, including the policy for the nomination and appointment of directors, is set out in the Nomination Committee Charter which is available in the Investor Relations section of the Company’s web site (www.nuplex.co.nz).

During the year, the Board created two sub-committees: one sub-committee to deal with the appointment of a new director and the second to deal with the appointment of the new chief executive officer.

Audit CommitteeThe Audit Committee is comprised of three independent, non-executive directors, of whom one is the Company Chairman, ex officio. The Managing Director, the Chief Financial Officer, the internal auditor and the external auditors attend meetings by invitation.

The composition of the Audit Committee during the last financial year was David Jackson (Committee Chair) Rob Aitken, Bryan Kensington (until November 2009) and Peter Springford (from November 2009). The qualifications of the members of the Audit Committee are disclosed on pages 20 and 21 of this report.

The Audit Committee met on five occasions during the year ended 30 June 2010 with attendances recorded as follows:


R Aitken 5/5

D Jackson 5/5

B Kensington 2/2

P Springford 4/4


The Committee has direct communication with and unrestricted access to the Group’s external auditors, the internal auditor and internal accounting staff.

The Committee’s responsibilities include:

• to oversee compliance with statutory financial reporting requirements

• to ensure that adequate internal controls are in place

• to advise the Board regarding accounting policies, practices and disclosure

• to review the scope and outcome of the external audit

• to review annual and half-yearly financial statements prior to approval by the board.

The Committee reports the proceedings of each meeting to the Board.

The Audit Committee has the responsibility for making recommendations in connection with the appointment of the external auditor. The Audit Committee Charter requires the Audit Committee to ensure that the external audit lead partner’s term is limited to five years. The Audit Committee will monitor to ensure that the rotation of the external engagement partner occurs in accordance with this requirement.

The Audit Committee has a formal charter which is available in the Investor Relations section of the Company’s web site (www.nuplex.co.nz).

Remuneration CommitteeThe Remuneration Committee is comprised of three independent, non-executive directors, of whom one is the Company Chairman, ex officio. The Managing Director is not a member of the Committee. The former Managing Director, John Hirst, was a member of the Committee for part of the year, but did not participate in deliberations concerning his remuneration.

The Remuneration Committee meets as required to review the remuneration packages of the Directors, the Managing Director and the group of managers reporting directly to the Managing Director before making recommendations to the Board.

Remuneration packages are reviewed annually and independent external advice is used to ensure that remuneration is competitive with like organisations within the jurisdiction in which an employee resides.


corporategoverNaNce continued

The composition of the Remuneration Committee during the last financial year was Barbara Gibson (Committee Chair), Rob Aitken, John Hirst (until April 2010) and Michael Wynter .

The Committee has met on five occasions during the year ended 30 June 2010 with attendances recorded as follows:


R Aitken 5/5

B Gibson 5/5

J Hirst 4/4

M Wynter 5/5


The Charter of the Remuneration Committee is available in the Investor Relations section of the Company’s web site (www.nuplex.co.nz).

The Company recently amended the Charter of the Remuneration Committee to comply with changes to the ASX Listing Rules and Corporate Governance Principles and Recommendations.

Safety Health and Environment CommitteeIn May 2010 the Board established a Safety Health and Environment (SHE) Board sub-committee comprised of three independent, non-executive directors of whom one is the Company Chairman, ex officio.

The purpose of the Committee is to assist the Board in discharging its responsibilities by assessing the effectiveness of the Company’s safety, health and environment programmes, initiatives and policies with a view to ensuring compliance with all legislative and regulatory requirements.

The composition of the SHE Committee during the last year was Peter Springford (Committee Chair), Rob Aitken and Barbara Gibson.

The Committee has met on two occasions since its formation with attendances recorded as follows:


R Aitken 2/2

B Gibson 2/2

P Springford 2/2


The Charter of the SHE Committee is available in the investor Relations section of the Company’s web site (www.nuplex.co.nz)

6. coDe of coNDuctThe Board has established a policy (Code of Conduct and Ethics Policy) to give guidance to its employees and Directors on how it expects them to conduct themselves when undertaking business on behalf of the Company.

The Board has a “Whistleblower” Policy to provide guidance and assistance to employees who may wish to disclose information that relates to wrongdoing in the workplace and related work environment.

The Code of Conduct and Ethics Policy is available in the Investors section of the Company’s web site (www.nuplex.co.nz).

7. traDiNg iN tHe compaNy’s sHaresThe Board has established a policy and procedure for the guidance and direction of Directors, senior managers and employees on the laws governing share trading (Securities Trading Policy and Guidelines).

Under the policy Directors, senior managers and employees are advised that it is illegal to buy or sell ordinary shares, capital notes or other listed securities if they have material information that is not generally available to the market and if it were generally available to the market, a reasonable person would expect it to have a material effect on the price of the Company’s listed securities.

The policy also covers the notification procedures that must be adopted by Directors and senior managers before they buy or sell the Company’s listed securities.

The Securities Trading Policy and Guidelines is available in the Investors section of the Company’s web site (www.nuplex.co.nz).

The Company recently amended the Share Trading Policy and Guidelines to comply with changes to the ASX Listing Rules.

8. commuNicatioNs aND DisclosureNuplex has established a Communications and Disclosure Policy to ensure compliance with NZX and ASX disclosure requirements and to ensure accountability for that compliance at a senior executive level.

The Communications and Disclosure Policy is available in the Investor Relations section of the Company’s web site (www.nuplex.co.nz).

Nuplex has established a separate Shareholder Communications Policy designed to promote effective communication with shareholders, and to encourage shareholder participation at the annual general meeting. Nuplex ensures that its Auditor attends the annual general meeting and is in a position to answer questions about the audit of Nuplex’s financial information.

The Shareholder Communications Policy is available in the Investor Relations section of the Company’s web site (www.nuplex.co.nz).


9. risk maNagemeNtNuplex recognises that in order to achieve its business plans and strategic goals, there must be a thorough understanding across the Company of the risks that may affect the ability of the Company to achieve those plans and goals.

Accordingly, Nuplex has established policies for the oversight and management of material business risks. The Board requires management to design and implement risk management and internal control systems which manage Nuplex’s material business risks. Throughout all of its business operations the Company has in place policies, processes and systems which are designed to identify, assess, monitor and manage material business risk.

Accordingly, the Company’s policies are aimed at managing risk in the following ways:

• The Board of Directors has oversight of risk management initiatives, policies and practices and is assisted in this regard by the Audit Committee in identifying risks which may have a material impact on the Company’s business.

• The Managing Director and senior executives of the Company are responsible for designing and implementing risk management and internal control systems which identify material risks that the Company faces as well as managing risk across the Group, and are required to report to the Board through the Managing Director. This includes formulation of policies and procedures which cover the identification, assessment, reduction, management and monitoring of risk, as well as identifying any material changes to the Group’s risk profile. These are required to be reported to the Board at regular intervals.

• There is regular assessment by the Board and senior executives of strategic risks affecting the Company’s operations and the establishment of controls to reduce their impact. This includes policies and procedures directed at maintaining all relevant registrations and approvals in relation to operating plant, processes, handling of materials that are hazardous or require traceability. On a regular basis the Board also reviews the Company’s internal controls and risk management practices to ensure that they are adequate and reflect the Company’s risk profile.

• Nuplex’s risk management policies require that risk assessments are conducted for all major work initiatives, where new projects are undertaken and for new product introductions.

• Nuplex’s risk management policies require that there is periodic verification of risk controls at various levels across the Company’s operations.

• The Company has established a range of policies and procedures aimed at assisting in the management of risk across the Company’s operations.

• The Board satisfies itself that adequate external insurance cover is in place appropriate for the company’s size and risk profile.

• The Board satisfies itself that adequate Safety, Health and Environmental Protection Policies and hazard assessments are in place and monitors performance. To assist in this process the Board established a SHE Board Sub-Committee in May 2010.

• The Managing Director and Chief Financial Officer also provide a declaration that the financial statements of the Group present a true and fair view, in all material respects of the Group’s financial position and operating results. The Managing Director and Chief Financial Officer are able to make this declaration having regard to the Company’s sound system of risk management and control.

• During the year, the Company established an internal audit function within the Group to assist the Company in carrying out the analysis and independent appraisal of the adequacy and effectiveness of the Group’s financial risk management and internal control systems. The internal audit function is independent of the external auditor.

In December 2009, the Board adopted the Nuplex Risk Management Framework which incorporates key principles covering Risk Governance, Risk Infrastructure and Oversight, and Risk Ownership to provide a structured and transparent approach to managing risk across the business.

The Board requires management to report to it on whether risks are being managed effectively, and management has reported to the Board periodically during the financial year under review as to the effectiveness of the management of material business risks.

10. iNterNal fiNaNcial coNtrol aND risk maNagemeNt

The Board, advised by the Audit Committee, monitors and approves the Company’s system of internal financial control which includes clearly defined policies controlling treasury operations, capital expenditure authorisation and risk management. The Board participates in the development of strategic plans, approves budgets and monitors performance monthly.

The Chief Financial Officer is responsible to the Managing Director for ensuring that all operations within the Company adhere to the board-approved financial control policies.

The Managing Director and Chief Financial Officer have signed a declaration stating:

1. That Financial Statements for year ended 30 June 2010 present a true and fair view, in all material respects, of the Group’s financial condition and operational results and are in accordance with NZIFRS.

2. That the statement referred to in the preceding paragraph 1 is founded on a sound system of risk management and control which implements policies adopted by the Board of Directors, and

3. That the Group’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.



11. remuNeratioN

11.1 Senior Executive Remuneration.The policy of the Company is to reward the Managing Director and senior managers with competitive remuneration packages that are aligned with the objectives of the company and its shareholders and comprise:

• A Total Employment Cost (TEC) element as defined below.

• A Short Term Incentive (STI) payment dependent on achievement of annual financial performance hurdles and specific operational objectives.

• A Medium Term Incentive (MTI) payment which is applicable to Senior Managers dependent on achievement of financial performance hurdles and specific operational objectives which may be required to be achieved over a period in excess of twelve months (to be introduced with effect from 1 July 2010)

• A Long Term Incentive (LTI) payment in the form of cash or ordinary shares in the Company applicable to Senior Executives based on achievement of performance criteria aligned to the objectives of shareholders including growth in Total Shareholder Return and Earnings Per Share.

Executive Salaries

The remuneration of the Senior Executives of the Company for year ended 30 June 2010 was as follows:

Total Employment Cost (TEC) includes the following components:

1. Cash salary

2. The cost of the provision of a motor vehicle to a standard nominated by the executive and approved by the Board.

3. Superannuation including compulsory and voluntary contributions

4. Other non-cash benefits nominated by the executive and approved by the Board

5. Fringe benefits tax payable in respect to any component of TEC.

Executive and management salaries were reviewed with effect from 1 January 2010 having been frozen at the level set previously at July 2008. In most cases, increases were in line with cost of living increases, except in cases of promotion or similar special circumstances.

Former Managing Director’s Remuneration

During the year ended 30 June 2008, the Board offered the then Managing Director, John Hirst an extension to his Service Agreement with the Company through to 30 June 2010. At the expiry of the term of this extension the Managing Director was entitled to receive the following payments:

• Accrued but untaken annual leave

• Entitlement in accordance with the Long Service Leave Act 1955 (Aust)

Name Position held TEC IncentivesTermination

& other Total

E SeverinCommenced employment 12 April 2010

Managing Director and Chief Executive Officer from 23 April 2010

224,357 190,869 415,226

J HirstRetired from the Company 30 June 2010

Managing Director and Chief Executive Officer until 23 April 2010

878,000 1,405,735 1,896,760 4,180,495

R Harmsen Chief Operating Officer Nuplex Resins 445,590 248,273 693,863

S Bastounas Chief Operating Officer Functional Materials and Specialties

407,750 213,252 621,002

I Davis Chief Financial Officer 406,000 221,418 627,418

C NorthcoteCeased employment 23 April 2010

Group General Manager Planning and Strategy

274,999 417,552 692,551

J Williams General Counsel and Company Secretary

284,000 101,475 385,475

T CookeRetired from the Company 31 December 2009

Group General Manager Operations 182,476 121,167 303,643

C DeetlefsCommenced employment 1 March 2010

Group General Manager Operations 110,993 56,884 167,877

3,214,165 2,437,905 2,435,479 8,087,549

(All figures are in AUD)


• Salary and Short Term Incentive and LTI entitlements due up to the date of expiry

• Expenses and any other moneys due

• The TEC for the whole of the current year plus an additional amount equal to the percentage of the TEC that is equal to the total payments made under the Short Term Incentive Plan in the prior three years as a percentage of the total TEC received for the same three year period.

These entitlements were paid to the former Managing Director on his retirement from the Company on 30 June 2010 and are reflected in the figures shown in the above table.

Managing Director’s Remuneration

The Managing Director, Emery Severin, commenced employment with the Company on 12 April 2010.

The Managing Director’s remuneration consists of salary and other benefits referred to below as “Total Employment Cost”, plus the short term and long term incentives referred to below.

Total Employment Cost (TEC).

The Managing Director’s TEC is AUD1.0 million per annum with an annual review. TEC includes salary and superannuation and may also include non-cash components such as a motor vehicle and costs associated with that vehicle.

Incentives

Under the terms of the employment agreement with the Managing Director, he is entitled to receive incentive awards as set out below calculated by reference to his TEC.

1. ShortTermIncentive(STI)

The amount of the STI payment in any year will be determined by the Board by assessment of the Managing Director’s performance against financial and non-financial targets set by the Board at the start of each financial year. For performance outcomes at target level, the Managing Director would receive 50% of his TEC and for performance outcomes at stretch level, he would receive a maximum of 100% of his TEC.

For the period from the commencement of employment to 30 June 2010, targets were set by the Board shortly after commencement and the incentive amount pro-rated for the reduced period.

2. LongTermIncentive(LTI)

The LTI plan is designed to drive behaviour that grows business value over the longer term and to complement the shorter term focus of the STI Plan.

The Managing Director is entitled to annual LTI grant up to an amount of 100% of TEC subject to achievement of performance hurdles. The initial grant was in the form of $900,000 cash

prorated for the period from commencement of employment until 30 June 2010. Thereafter an annual grant of cash or share acquisition rights with an aggregate fair market value equivalent to 100% of TEC will be made. Shareholders will be asked to approve any grant of share acquisition rights at the 2010 Annual General Meeting (AGM), the terms of which will be set out in the notice of meeting for the AGM. Any grant of acquisition rights will be subject to shareholder approval being given.

Vesting of an LTI grant is subject to performance hurdles based on Earnings per Share (EPS) and Nuplex’s Total Shareholder Return (TSR) performance relative to companies within the NZX50 Index over a measurement period of three to four years.

2007 Senior Manager Incentive Scheme

In the previous financial year, the Board resolved to cancel the 2007 Scheme with effect from 30 June 2009.

On the cancellation of the 2007 Scheme, shares issued under the 2007 Scheme were sold and the proceeds used to repay loans made by the Company to employees in connection with the acquisition of such shares. As the proceeds of sale did not fully repay the loans made by the Company, the Company granted a waiver of outstanding loan balances subject to compliance with regulatory requirements. Once this occurred, employees ceased to own any shares issued pursuant to the 2007 Scheme and the loans were discharged.

2009 LTI Plan

During the year ended 30 June 2010, the Company offered a cash-based LTI incentive to senior managers. The LTI Plan was designed to drive behaviour that grows business value over the longer term and to complement the shorter term focus of the STI Plan.

The 2009 LTI Plan, effective from 1 July 2009, is subject to performance hurdles based on Earnings Per Share (EPS) and relative Total Shareholder Return over a measurement period of three to four years (2012-2013).

Under the terms of the Plan, Nuplex’s Total Shareholder Return (TSR) performance will be measured relative to companies within the NZX50 Index. TSR is defined in the plan rules as share price growth and dividends paid and reinvested (adjusted for rights, bonus issues and any capital reconstructions) measured over the measurement period.

The EPS hurdle is triggered by a percentage growth in Nuplex’s compound annual growth rate in earnings per share over the measurement period. Target growth in EPS is 10% per annum from a starting base of EPS for the year ended 30 June 2009 of NZ19.18 cents.

In respect of the LTI grant, 50% of the grant is based on EPS and 50% on TSR.



11.2 Directors’ Remuneration

Annual Fees

Fees paid to non-executive directors are fixed based on service during the year and do not include any Short Term or Long Term Incentives.

The maximum aggregate fees payable to non-executive Directors was set at $1,000,000 by Ordinary Resolution of Shareholders at the Annual Meeting held on 2 November 2007.

The base fee per director was increased by 3% on 1 January 2010 from $98,000 to $101,000 per annum. There was no change to the allowances paid to members of Board sub-committees, which remain at $20,000 for the Chairman of the Audit Committee, $15,000 for the Chairman of the Remuneration Committee, $10,000 for other members of the Audit Committee and $7,500 for other members of the Remuneration Committee. The allowances for the newly constituted SHE Committee are $15,000 for the Chairman and $7,500 for other members of the committee. The Board also resolved that the fee payable to the Board Chairman be increased by 3% from $196,000 to $202,000 per annum, inclusive of attendance at Board Sub-Committee meetings, with effect from 1 January 2010.

For the year ended 30 June 2010, Directors were paid the above amounts in the currency of their country of residence.

Remuneration paid to Directors during the year ended 30 June 2010 is disclosed in the Statutory Information section of this report on page 86 of this report.

The Board has resolved that with effect from 1 July 2010, the fee payable to the Board Chairman be increased to $220,000 per annum, inclusive of attendance at Board Sub-Committee meetings. The Board also resolved that with effect from 1 July 2010, all Directors fees be paid in Australian Dollars or at the equivalent New Zealand dollar rate if the director resides in New Zealand.

Retirement Allowances

The Board has resolved that payments under clause 12.4 of the Constitution will be crystallised at the average of the last 3 years total remuneration up to 30 June 2004 plus an allowance for cost of living (CPI) adjustments. Retiring allowances will be paid to the non-executive directors serving at that time on retirement in full provided they have served at least 6 years as a director and on a pro-rata basis for service less than 6 years.

Directors appointed to the Board after 30 June 2004 are not eligible to a retirement allowance.

12. summary of waivers graNteD by NZxFor the purposes of NZX Listing Rule 10.5.5(f), Nuplex discloses that it has been granted one waiver by the NXZ in the 12 month period preceding the date 2 months before the date of publication of this annual report.

Waiver from Listing Rule 7.6.4(b)(iii)On 15 September 2009 Nuplex was granted a waiver from NZX Listing Rule 7.6.4(b)(iii) in connection with the provision of financial assistance to the then Managing Director John Hirst in the form of a loan waiver as part of the cancellation of the 2007 Senior Management Incentive Scheme.

13. goverNaNce practicesThe Board has reviewed its governance practices against the ASX Corporate Governance Principles and Recommendations (2nd Edition), NZX Corporate Governance Best Practice Code and the NZ Securities Commission Principles and Guidelines of Corporate Governance and is of the view that Nuplex is compliant with these codes.


fiNaNcialreport

The Directors are pleased to present the Financial Statements of the Nuplex Group for the year ended 30 June 2010

David Jackson Director

26 August 2010

Rob Aitken Chairman

26 August 2010

32 Auditors’ Report

33 Statements of Comprehensive Income

34 Statements of Change in Equity

35 Statements of Financial Position

36 Cash Flow Statement

37 Notes to the Financial Statements

83 Five-year Statistical Summary

84 Shareholder Information

86 Statutory Information

IBC Corporate Directory

coNteNts


auDitor’sreport

to tHe sHareHolDers of Nuplex iNDustries limiteDWe have audited the financial statements on pages 33 to 82. The financial statements provide information about the past financial performance and financial position of the company and group as at 30 June 2010. This information is stated in accordance with the accounting policies set out on 37 to 44.

Directors’ responsibilitiesThe Directors are responsible for the preparation of financial statements which give a true and fair view of the financial position of the company and group as at 30 June 2010 and the results of their operations and cash flows for the year ended on that date.

Auditors’ responsibilitiesIt is our responsibility to express an independent opinion on the financial statements presented by the Directors and report our opinion to you.

Basis of opinionAn audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing:

• the significant estimates and judgements made by the Directors in the preparation of the financial statements;

• whether the accounting policies are appropriate to the company’s and group’s circumstances, consistently applied and adequately disclosed.

We conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Our firm has also provided other services to the company and certain of its subsidiaries in relation to taxation and general accounting services. Partners and employees of our firm may also deal with the company and group on normal terms within the ordinary course of trading activities of the business of the company and group. These matters have not impaired our independence as auditors of the company and group. The firm has no other relationship with, or interest in, the company or any of its subsidiaries.

Unqualified opinionWe have obtained all the information and explanations we have required.

In our opinion:

• proper accounting records have been kept by the company as far as appears from our examination of those records;

• the financial statements on pages 33 to 82:

- comply with New Zealand generally accepted accounting practice;

- give a true and a fair view of the financial position of the company and group as at 30 June 2010 and the results of their operations and cash flows for the year ended on that date.

Our audit was completed on 26 August 2010 and our unqualified opinion is expressed as at that date.

Sydney

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.


statemeNts of compreHeNsive iNcomefor tHe year eNDeD 30 JuNe 2010

Group Company

(NZD in thousands) Note 2010 2009 2010 2009

Sales revenue 1,459,933 1,493,693 89,766 87,505

Cost of sales (1,111,071) (1,195,501) (65,073) (66,449)

Gross profit 348,862 298,192 24,693 21,056

Other operating income 3 2,532 5,228 59,434 441

Distribution expenses (70,732) (74,154) (4,403) (5,174)

Marketing expenses (85,864) (93,232) (8,114) (9,300)

Administration expenses (65,858) (61,420) (9,998) (9,270)

Other operating expenses 4 (22,905) (16,143) (2,746) (3,761)

Operating profit before financing costs 106,035 58,471 58,866 (6,008)

Financial income 1,420 2,696 3,349 2,448

Financial expenses (22,126) (33,724) (8,555) (7,067)

Net financing costs 7 (20,706) (31,028) (5,206) (4,619)

Share of profits/(losses) of associates 12 2,131 (42) – –

Profit before tax 87,460 27,401 53,660 (10,627)

Income tax (expense)/benefit 8 (20,478) (8,330) 959 2,004

Profit for the year 66,982 19,071 54,619 (8,623)

Other comprehensive income

Foreign currency translation differences for foreign operations (39,483) 15,335 – –

Net gain/(loss) on hedge of net investment in foreign operation 1,821 (13,534) – –

Effective portion of changes in fair value of cash-flow hedges 6,999 (8,834) 911 (963)

Income tax on other comprehensive income (2,632) 6,710 (273) 289

Other comprehensive income for the period, net of income tax (33,295) (323) 638 (674)

Total comprehensive income for the year 33,687 18,748 55,257 (9,297)

Profit attributable to:

Equity holders of the parent 64,210 16,729 54,619 (8,623)

Non-controlling interests 2,772 2,342 – –

66,982 19,071 54,619 (8,623)

Total comprehensive income attributable to:

Equity holders of the parent 31,262 15,501 55,257 (9,297)

Non-controlling interests 2,425 3,247 – –

33,687 18,748 55,257 (9,297)

Basic earnings per share 9 0.34 0.28

Diluted earnings per share 9 0.32 0.22

To be read in conjunction with the notes to the financial statements on pages 37 to 82.


statemeNts of cHaNges iN equityfor tHe year eNDeD 30 JuNe 2010

Group CompanyAttributable to equity holders of the parent

(NZD in thousands) NoteShare

capitalTranslation

reserveRetained earnings

Hedging reserve Total

Non-controlling

InterestTotal

EquityShare

capital Retained earnings


Balance at 1 July 2009 341,944 28,929 146,248 (5,449) 511,672 9,950 521,622 341,944 81,034 (819) 422,159

Other Comprehensive Income

Foreign currency translation differences 7 – (39,136) – – (39,136) (347) (39,483) – – – –

Net gain/(loss) on hedge of net investment in foreign operation, net of tax – 1,275 – – 1,275 – 1,275 – – – –

Effective portion of changes in fair value of cash-flow hedges, net of tax – – – 4,913 4,913 – 4,913 – – 638 638

Total other Comprehensive Income – (37,861) – 4,913 (32,948) (347) (33,295) – – 638 638

Profit for the year – – 64,210 – 64,210 2,772 66,982 – 54,619 – 54,619

Total comprehensive income for the year – (37,861) 64,210 4,913 31,262 2,425 33,687 – 54,619 638 55,257

Contributions by and distributions to owners

Shares issued 20 7,720 – – – 7,720 – 7,720 7,720 – – 7,720

Dividends paid 20 – – (35,113) – (35,113) (4,586) (39,699) – (35,113) – (35,113)

Balance as at 30 June 2010 349,664 (8,932) 175,345 (536) 515,541 7,789 523,330 349,664 100,540 (181) 450,023

Group CompanyAttributable to equity holders of the parent

(NZD in thousands) NoteShare

capitalTranslation

reserveRetained earnings


Non-controlling

InterestTotal

EquityShare

capital Retained earnings


Balance at 1 July 2008 183,562 23,973 148,314 735 356,584 8,477 365,061 183,562 108,452 (145) 291,869

Other Comprehensive Income

Foreign currency translation differences 7 – 14,430 – – 14,430 905 15,335 – – – –

Net gain/(loss) on hedge of net investment in foreign operation, net of tax – (9,474) – – (9,474) – (9,474) – – – –

Effective portion of changes in fair value of cash-flow hedges, net of tax – – – (6,184) (6,184) – (6,184) – – (674) (674)

Total other Comprehensive Income – 4,956 – (6,184) (1,228) 905 (323) – – (674) (674)

Profit for the year – – 16,729 – 16,729 2,342 19,071 – (8,623) – (8,623)

Total comprehensive income for the year – 4,956 16,729 (6,184) 15,501 3,247 18,748 – (8,623) (674) (9,297)

Contributions by and distributions to owners

Shares issued 20 158,382 – – – 158,382 – 158,382 158,382 – – 158,382

Dividends paid 20 – – (18,795) – (18,795) (1,774) (20,569) – (18,795) – (18,795)

Balance as at 30 June 2009 341,944 28,929 146,248 (5,449) 511,672 9,950 521,622 341,944 81,034 (819) 422,159



statemeNts of fiNaNcial positioNas at 30 JuNe 2010

Group Company


Equity attributable to members of the parent company 20

Share capital 349,664 341,944 349,664 341,944

Translation reserve (8,932) 28,929 – –

Retained earnings 175,345 146,248 100,540 81,034

Hedging reserve (536) (5,449) (181) (819)

Non-controlling interests 20 7,789 9,950 – –

Total Equity 523,330 521,622 450,023 422,159

Property, plant and equipment 14 272,163 319,199 19,683 20,272

Intangible assets 15 146,334 153,402 2,155 2,166

Investments in associates 12 4,371 3,092 – –

Investments in subsidiaries – – 177,725 177,725

Trade and other receivables 11 – – 274,405 245,247

Deferred tax asset 13 9,393 10,540 86 1,063

Non-current Assets 432,261 486,233 474,054 446,473

Inventories 10 192,780 173,668 15,467 14,856

Trade and other receivables 11 287,113 256,489 16,617 14,333

Income tax receivable 10,077 10,860 3,434 3,074

Cash and cash equivalents 82,063 119,499 12,424 13,190

Current Assets 572,033 560,516 47,942 45,453

Total Assets 1,004,294 1,046,749 521,996 491,926

Borrowings 17 154,067 248,218 52,659 52,571

Employee provisions 18 23,413 24,844 617 1,091

Provisions 19 – 418 – –

Deferred tax liability 13 13,953 20,206 – –

Non-current Liabilities 191,433 293,686 53,276 53,662

Borrowings 17 356 475 74 73

Trade and other payables 16 238,735 203,890 15,317 13,470

Employee provisions 18 23,585 17,511 1,251 937

Provisions 19 10,637 6,221 2,055 1,625

Income tax payable 16,218 3,344 – –

Current Liabilities 289,531 231,441 18,697 16,105

Total Liabilities 480,964 525,127 71,973 69,767

Total Net Assets 523,330 521,622 450,023 422,159



casH flow statemeNtfor tHe year eNDeD 30 JuNe 2010

Group Company


Receipts from customers 1,518,671 1,690,816 92,295 96,385

Interest received 1,046 2,207 3,349 2,786

Payments to suppliers and employees (1,385,908) (1,522,358) (90,264) (94,635)

Interest paid (20,357) (32,780) (6,891) (4,900)

Dividends received 844 738 – –

Income taxes paid (9,590) (15,392) – (202)

Net cash from/(used in) operating activities 28 104,706 123,231 (1,511) (566)

Disposal of property, plant and equipment 7 175 – 54

Acquisition of property, plant, equipment and intangibles (9,860) (18,893) (728) (406)

Loans to subsidiaries – – 28,866 (104,464)

Increase in investment in subsidiaries – – – (28,650)

Purchases of businesses, net of cash acquired (5,317) (4,000) – –

Disposal of businesses, net of cash disposed of – 1,044 – –

Net cash from/(used in) investing activities (15,170) (21,674) 28,138 (133,466)

Proceeds from borrowings – 12,868 – –

Repayment of borrowings (88,533) (186,279) – –

Proceeds from issue of ordinary share capital – 159,595 – 159,595

Transaction fees on issue of share capital – (5,968) – (5,968)

Dividends paid to shareholders (31,979) (15,771) (27,393) (13,996)

Net cash from/(used in) financing activities (120,512) (35,555) (27,393) 139,631

Increase/(decrease) in cash and cash equivalents (30,976) 66,002 (766) 5,599

Cash and cash equivalents at 1 July 119,499 50,843 13,190 7,591

Effect of exchange rate fluctuation (6,460) 2,654 – –

Cash and cash equivalents at 30 June 82,063 119,499 12,424 13,190

Comprising:

Cash balances 61,308 94,786 7,424 5,090

Cash on call deposit 20,755 24,713 5,000 8,100

82,063 119,499 12,424 13,190


Notes to tHe fiNaNcial statemeNtsfor tHe year eNDeD 30 JuNe 2010

1. statemeNt of sigNificaNt accouNtiNg policies Nuplex Industries Limited (the ‘Company’) is a Company registered and domiciled in New Zealand. The consolidated financial statements of the Company comprise the Company and its subsidiaries (the ‘Group’) and the Group’s interest in associated entities.

a. Statement of complia nceThe financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZIFRS), and other applicable Financial Reporting Standards, as appropriate for profit-orientated entities. The financial statements also comply with International Financial Reporting Standards (IFRS).

The accounting policies set out below have been applied consistently to all periods in these financial statements, there have been no changes in the accounting policies during the year, except for in relation to NZ IFRS 3 Business Combinations, as described in Note 1(c), NZ IAS 23 Borrowing Costs, as described in Note 1(i), NZ IFRS 8 Operating Segments as described in Note 1(t), and the revised NZ IAS 1 Presentation of Financial Statements as described in Note 1(z).

The International Accounting Standards Board has issued a number of other standards, amendments and interpretations which are not yet effective, detailed below. The Group has not yet applied these in preparing these financial statements and will apply each in the period in which it becomes mandatory.

Standard Description

Mandatory for the

year-ending

NZ IFRS 5 Amendments to Non Current Assets Held for Sale and Discontinued Operations Thursday, June 30, 2011

NZ IFRS 8 Amendments to Operating Segments Thursday, June 30, 2011

NZ IAS 1 Amendments to Presentation of Financial Statements Thursday, June 30, 2011

NZ IAS 7 Amendments to Statement of Cash Flows Thursday, June 30, 2011

NZ IAS 17 Amendments to Leases Thursday, June 30, 2011

NZ IAS 36 Amendments to Impairment of Assets Thursday, June 30, 2011

NZ IAS 39 Amendments to Financial instruments: Recognition and Measurement Thursday, June 30, 2011

NZ IFRS 1Amendments to First-time Adoption of NZ IFRSs -Additional Exemptions for First-time Adopters Thursday, June 30, 2011

NZ IFRS 1Amendments to First-time Adoption of NZ IFRSs -Limited Exemptions for NZ IFRS 7 comparatives Thursday, June 30, 2011

NZ IFRS 2Amendments to Share-based Payments - Group Cash-settled Share-based Payment Transactions Thursday, June 30, 2011

NZ IFRS 9 Financial Instruments Monday, June 30, 2014

NZ IAS 24 Related Party Disclosures (revised 2009) Saturday, June 30, 2012

NZ IAS 32 Amendments to Financial Instrument: Presentation - Classification of Rights Issues Thursday, June 30, 2011

NZ IFRIC 14Amendments to The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Saturday, June 30, 2012

NZ IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Thursday, June 30, 2011

The following standards and interpretations may have a material impact on the Group’s financial performance or position. The other standards and interpretations are not considered likely to have a material impact for the Group.

NZ IAS 17: Amendments to LeasesThe amendments removed the guidance stating that a lease of land with an indefinite economic life normally is classified as an operating lease, unless at the end of the lease term title is expected to pass to the lessee. Additionally, the amendments clarify that when a lease includes both the land and building elements, an entity should determine the classification of each element based on paragraphs 7–13 of NZ IAS 17, taking account of the fact that land normally has an indefinite economic life. This may result in some of the Group’s long term leases being reclassified as finance leases.


Notes to tHe fiNaNcial statemeNtsfor tHe year eNDeD 30 JuNe 2010 coNtiNued

1. statemeNt of sigNificaNt accouNtiNg policies coNtiNued

b. Basis of PreparationThe financial statements of the Group and Company comply with the Financial Reporting Act 1993 and the Companies Act 1993. These financial statements are presented in New Zealand dollars, which is the Company’s functional currency, except where stated otherwise, rounded to the nearest thousands. They are prepared on the historical cost basis except that previously revalued property, plant and equipment carrying values which on transition to NZIFRS have been deemed as cost, and the following assets and liabilities are stated at their fair values: derivative financial instruments and deferred acquisition settlements payable.

The consolidated financial statements have been approved by the Board of Directors on 26 August 2010.

The preparation of financial statements in conformity with NZIFRS’s requires management to make judgements, estimates and assumptions that effect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about carrying values of some assets and liabilities. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Information about the significant areas of judgement exercised or estimation in applying accounting policies that have had a significant impact on the amounts recognised in the financial statements are described below.

i. Classification of investmentsClassifying investments as either subsidiaries, associates or joint ventures requires management to assess the degree of influence which the Group holds over the investee. In arriving at a conclusion management take into account the constitutional structure of the investee, governance arrangements, current and future representation on the Board of Directors, and all other arrangements which might allow influence over the operating and financial policies of the investee.

ii. Valuation of goodwill and other intangiblesThe carrying value of goodwill is assessed at least annually to ensure that it is not impaired. This assessment requires management to estimate future cash flows to be generated by cash generating units to which goodwill has been allocated. Estimating future cash flows entails making judgements including the expected rate of growth of revenues and expenses, margins and market shares to be achieved, and the appropriate discount rate to apply when discounting future cash flows. Note 15 of these financial statements provides more information on the assumptions management have made in this area and the carrying values of goodwill. As the outcomes in the next

financial period may be different to the assumptions made, it is impracticable to predict the impact that could result in a material adjustment to the carrying amount.

iii. Recognition of deferred tax assetsThe value of deferred tax assets recognised in the financial statements involve a significant degree of judgement around the future profitability, ownership and legislative outcomes impacting on the Group entity to which the assets or potential assets relate. In making the required judgements management take account of all circumstances of which they are aware and current economic forecasts which might have bearing on the tax situation of the entity concerned. Note 13 to these financial statements contains further information on tax losses the Group has incurred but not recognised as a deferred tax asset.

iv. Doubtful debt provisionsProvisioning for doubtful debts takes into account known factors impacting specific debtors, as well as the overall profile of each Group company’s debtors portfolio. Factors such as the age of receivable balances, past collection history, the level of activity in customer accounts are taken into account. Further information on the doubtful debt provision is contained in Note 21 to these financial statements.

v. Provisions and contingenciesIdentification, recognition and valuation of provisions requires management to make judgements about the likelihood of an amount becoming payable or an economic benefit being foregone, estimation of the value of the potential obligations based on available information and estimating when such obligations are likely to be settled. Where a range of possible outcomes exist, management must apply judgement in assessing the probability that any given outcome may occur. Note 19 to these financial statements gives further information on the value of provisions recognised. As new contingencies can arise unexpectedly or existing items be resolved at short notice, it is impracticable to predict how the carrying value may be impacted over the next financial period but changes could result in a material adjustment to the carrying amount.

vi. Employee provisionsThe Group is exposed to defined benefit obligations and long service leave obligations that require significant judgements to be made in the calculation of the Group’s expected future liability and its present value. Significant assumptions made include the expected asset growth rates, social security rates, pension and salary growth rates and the discount rates to be applied in calculating present values. For each significant defined benefit scheme a qualified external actuary is engaged to provide a valuation based, where possible, on externally verifiable assumptions. As the outcomes in the next financial period may be different to the assumptions made, it is impracticable to predict the impact that could result in a material adjustment to the carrying amount.



vii. Property plant and equipment and finite-life intangible assetsIn accounting for Property plant and equipment and finite-life intangible assets, management is required to make judgements on the expected life of the asset, the likelihood of the assets obsolescence and the likelihood that the asset will continue to be utilised. Management reassesses useful lives at least annually and considers whether indicators of impairment have occurred that might necessitate impairment testing. Assessing impairment where required may involve estimation and valuation of future cash-flows that an asset is expected to generate and making assumptions thereon. As the outcomes of the next financial period may differ from the assumptions made, it is impractical to predict the impact that could result in a material adjustment to the carrying amount.

c. Basis of consolidation

Accounting for business combinationsPrior to 1 July 2009 all business combinations were dealt with using the purchase method. All business combinations occurring on or after 1 July 2009 are accounted for by applying the acquisition method. The change in accounting policy was due to the adoption of NZ IFRS 3 Business Combinations and in accordance with the transitional provisions of such standard; comparative figures have not been restated. The change in accounting policy had no impact on assets, profit or earnings per share in the year ended 30 June 2010.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control the Group takes into consideration potential voting rights that are currently exercisable. Acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another.

The Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as at the acquisition date.

Consideration transferred includes the fair value of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and equity interests issues by the Group. Consideration transferred also includes the fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in the business combination. If a business combination results in the termination of pre-existing relationships between the Group and the acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised in other expenses.

Transaction costs that the Group incurs in connection with a business combination, such as finders fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred in the Group financial statements.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably.

When share-based payment awards (replacement awards) are exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then a part of the market-based measure of the replacement awards is included in the consideration transferred. If future services are required, then the difference between the amount included in consideration transferred and the market-based measure of the replacement awards is treated as post combination compensation cost.

Accounting for acquisitions of non-controlling interestsAcquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions. Previously goodwill was recognised arising on the acquisition of a non-controlling interest in a subsidiary; and that represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the exchange.

The change in accounting policy was due to the adoption of NZ IFRS 3 Business Combinations and NZ IAS 27 Consolidated and Separate Financial Statements, in accordance with the transitional provisions of these standards; comparative figures have not been restated. The change in accounting policy had no impact on assets, profit or earnings per share in the year ended 30 June 2010.

SubsidiariesSubsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

In the Company’s financial statements, investments in subsidiaries are carried at the lower of cost or recoverable amount.

AssociatesAssociates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments in associates are accounted for using the equity method and are initially measured at cost. The consolidated financial statements include the Group’s share of the total recognised income, expense and equity movements of associates on an equity accounted basis, net of any impairment losses, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in the associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.




Transfer of entities or assets under Group controlBusiness combinations arising from the transfer of assets or interests from one Group entity to another Group entity are accounted for at the carrying amounts recognised previously in the Group’s controlling shareholders consolidated financial statements.

Transactions eliminated on consolidationIntraGroup balances and any unrealised gains or losses or income and expenses arising from intraGroup transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

d. Foreign currency

Foreign currency transactionsTransactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair values were determined.

Financial statements of foreign operationsThe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to New Zealand dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to New Zealand dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. This would normally be the average foreign exchange rate for the reporting period, or such shorter period for an entity or business acquired or disposed of during the period. Exchange differences arising on these retranslations are recognised in the translation reserve.

Net investment in foreign operationsExchange differences arising from the translation of the net investment in foreign operations, and the related hedges and deferred tax impact are recognised in other comprehensive income to the extent that the hedge is effective and are presented within equity in the translation reserve. If ineffective it is recognised in profit or loss. Amounts recognised in equity are released to profit or loss upon disposal.

e. Revenue and other operating income

Sale of goodsRevenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership

have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction in revenue as the sales are recognised.

Dividend incomeDividend income is recognised in profit and loss on the date the entity’s right to receive payment is established, which is when the dividend is declared. Dividend income from associates reduces the investment balance shown in the consolidated statement of financial position.

f. Expenses

Operating lease paymentsPayments made under operating leases are recognised in profit and loss on a straight-line basis over the term of the lease.

Net financing costsNet financing costs comprise interest payable on borrowings calculated using the effective interest rate method, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in profit and loss. The interest expense component of finance lease payments is recognised in profit and loss using the effective interest rate method. Interest income is recognised in profit and loss as it accrues, using the effective interest rate method.

g. Income taxIncome tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit and loss except if it relates to items recognised directly in equity or other comprehensive income, in which case the income tax is recognised therein. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustments to tax payable in prior years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for taxation purposes, the initial recognition of assets and liabilities that affect neither accounting, nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected realisation or settlement of the carrying amount of assets and liabilities, using tax rates at balance date, or if known, tax rates at the expected time of realisation or settlement.

Tax losses and other deferred tax assets are recognised only to the extent that it is probable that future tax profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.



h. Earnings per shareThe Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

i. Property, plant and equipment

Owned assetsItems of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs (see below).

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying value of the replaced part is derecognised. The cost of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

Accounting for borrowing costsIn respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 July 2009, the Group capitalises borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Previously the Group immediately recognised all borrowing costs as an expense. The change in accounting policy was due to the adoption of NZ IAS 23 Borrowing Costs. In accordance with the transitional provisions of the standard, comparative figures have not been restated. The change in accounting policy had no material impact on assets, profit or earnings per share in the year ended 30 June 2010.

Leased assetsLeases in terms of which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases.

DepreciationDepreciation is charged to profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Depreciation is classified as Distribution, Marketing, Administration or other based on the function of the

underlying asset to which the charge relates. The land component of land and buildings is not depreciated. The estimated useful lives are as follows:

Land and buildings 20 – 50 years

Plant and equipment 3 – 20 years

Motor vehicles 5 years

j. Intangible assets

GoodwillPrior to 1 July 2009 all business combinations were dealt with using the purchase method. All business combinations occurring on or after 1 July 2009 are accounted for by applying the acquisition method. Goodwill represents amounts arising on acquisition of subsidiaries and associates, and represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. Negative goodwill arising on an acquisition is recognised directly in profit and loss.

Intellectual propertyExpenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge, is recognised in profit and loss as an expense as incurred. Expenditure on product or process development activities, whereby research findings are applied to the development of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible with the probability of future economic benefits and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Other development expenditure is recognised in profit and loss as an expense as incurred.

Purchased agency portfolioAgency agreements acquired are capitalised as intangible assets at a value based on a discounted cash flow analysis of their expected net worth at acquisition. The portfolio of agreements is not considered to have a finite life, as agreements can be rolled over at the option of the Group, and it is reasonably expected that this will occur, and as such the portfolio is not amortised. The portfolio is tested for impairment each reporting period and any impairment is recognised in profit and loss.

Other intangible assetsOther intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.




Subsequent expenditureSubsequent expenditure is capitalised only when it increases the future economic benefits embodied in the asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

AmortisationAmortisation is charged to profit and loss on a straight-line basis over the estimated useful lives of the finite life intangible assets. Goodwill and intangible assets with an indefinite useful life are not amortised but tested for impairment at each annual balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

intellectual property up to 15 years

other up to 5 years

k. Trade and other receivablesTrade and other receivables are initially stated at fair value and are categorised as loans and receivables which are subsequently measured at amortised cost less impairment.

l. InventoriesInventories are stated at lower of cost and net realisable value with due allowance for rework and/or obsolescence. Raw materials, packaging and inventories purchased for resale are valued on a weighted average cost basis. Manufactured inventories and work in progress are valued at the cost of materials plus direct labour and factory overheads based on normal operating capacity, including all costs of bringing items to their present location and condition.

m. Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits maturing in less than three months and readily convertible to cash. Bank overdrafts that are repayable on demand and form part of the Group’s cash management are included for the purposes of the cash flow statements.

n. ImpairmentThe carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. For intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of other assets in the unit on a pro-rata basis. The recoverable amount of other assets is the greater of their net selling price and value in use.

o. EquityShare capital is recognised at the fair value of the consideration received by the Company. Transaction costs attributable to the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. Dividends are recognised as a liability in the period in which they are declared.

p. Interest-bearing borrowingsInterest-bearing borrowings are recognised initially at fair value less attributed transaction costs, and the attributed transaction costs are amortised over the period of the borrowings on an effective interest basis.

Subsequent to initial recognition, borrowings are measured at amortised cost using the effective interest rate method, less any impairment losses.

q. Employee benefits

Share-based transactionsPerformance share rights and share loans are granted to senior management. The fair value of the rights and loan waivers is recognised as an employee expense with a corresponding decrease in receivables. The fair value of rights and loan waivers are measured at the grant date and spread over the vesting period, taking into account the terms and conditions upon which the rights and loans were granted. The rights are cash settled and the loans are equity settled.

Defined contribution plansObligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss in the periods during which services are rendered by employees.

Defined benefit plansThe Group’s net obligation in respect of defined benefit pension and medical plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned or might receive in return for their service in the current and prior periods. That benefit is discounted to determine its present value and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AAA rated government bonds that have maturity dates approximating to the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised immediately as an expense in the income statement.

In respect of actuarial gains and losses that arise subsequent to transition in calculating the Group’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds 10 per cent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in profit and loss over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.



Long-term service benefitsThe Group’s obligation in respect of long-term service benefits, other than pension plans, is the amount of the future benefit, including on-costs, and discounted to present value at discount rates appropriate to the local jurisdiction in which the liability arises, that employees have earned in return for their service in the current and prior periods.

Termination benefitsTermination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. If benefits are payable more than 12 months after the end of the reporting period then they are discounted to their present value.

OtherVested sick leave, annual leave and bonuses are measured at their nominal amounts, based on remuneration rates which are expected to be paid when the liability is settled. These amounts are disclosed in current employee benefits.

r. ProvisionsA provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

s. PayablesLiabilities for trade payables and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods or services received, whether or not billed.

t. Segment reportingAs of 1 July 2009 the Group determines and presents operating segments based on the information that is internally provided to the CEO, who is the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of NZ IFRS 8 Operating Segments. Previously reporting segments were determined and presented in accordance with NZ IAS 14 Segment Reporting.

Comparative segment information has been re-presented in conformity with the transitional requirements of NZ IFRS 8. Since the change in accounting policy only impacts presentation and disclosure there is no impact on earnings per share.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

u. Financial instruments

Non-derivative financial instrumentsNon-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial instruments are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Derivative financial instrumentsThe Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognised initially at fair value (transaction price). Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit and loss except where the derivatives qualify for hedge accounting, as described in policy (v).

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the balance sheet date.

v. Hedging

Cash flow hedgesWhere a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in profit and loss in the same period or periods during which the underlying exposure impacts profit and loss. When the hedged item is a non-financial asset, the amount recognised in other comprehensive




income is transferred to the carrying amount of the asset when the asset is recognised. The ineffective part of any gain or loss is recognised immediately in profit and loss.

Hedges of net investments in foreign operationsThe portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion is recognised immediately in profit and loss.

w. Assets held for sale and discontinued operationsImmediately before classification as held for sale, the measurement of the assets (and all assets and liabilities in a disposal Group) is brought up-to-date in accordance with applicable accounting standards. Then, on initial classification as held for sale, non-current assets and disposal Groups are recognised at the lower of carrying amount and fair value less costs to sell.

Impairment losses on initial classification as held for sale are included in profit or loss, even when there is a revaluation. The same applies to gains and losses on subsequent remeasurement.

A discontinued operation is a component of the consolidated entity’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier.

x. Government assistance programmesThe Group recognises amounts received under Government assistance programmes as other income in profit or loss when there is reasonable assurance that they will be received and that the Group will comply with the conditions associated with the grant. Amounts that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the same periods in which the expenses are recognised.

y. Determination of fair valuesA number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. The following summarises the major methods and assumptions used in estimating those fair values. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Trade receivables and payablesFair value is estimated as the present value of future cash-flows discounted at market rates of interest where settlement is not expected within 12 months.

Secured bank loansFair value is taken to be the carrying value of these assets and liabilities due to their short term repricing.

DerivativesFor forward exchange contracts and interest rate swaps independent third party valuations are used.

Capital notesFair value is calculated based on discounted expected future principal and interest cash flows.

Finance lease liabilitiesThe fair value is estimated as the present value of future cash flows, discounted at current market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.

z. Presentation of financial statementsThe Group applies revised NZ IAS 1 Presentation of Financial Statements, which became effective as of 1 July 2009. As a result the Group presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation there is no impact on earnings per share.

2. segmeNt aNalysisThe Group has two reportable segments, as described below. The reportable segments offer products and services with markedly different production processes and are managed separately. For each of the reporting segments the CEO reviews internal management reports monthly. The following summary describes the operations in each of the Group’s reportable segments:

Inter-segment pricing is determined on an arm’s length basis.

Resins Global manufacture of synthetic resins for regional markets. Distribution of complementary functional materials.

Specialties Manufacture and distribution of a range of functional materials for regional markets.

Geographical segments In presenting information on the basis of geographical segments, segment sales are based on the ultimate country of destination of the product if known. Segment assets are based on the geographical location of the assets.


2. segmeNt aNalysis coNtiNued

2010 2009

(NZD in thousands) Resins Specialties Total Group Resins Specialties Total Group

Sales to outside customers 1,169,766 290,167 1,459,933 1,190,116 303,577 1,493,693

Inter–segment sales 447 7,311 4,394 5,433

Segment sales 1,170,213 297,478 1,194,510 309,010

EBITDA 119,935 19,501 139,436 73,655 17,875 91,530

Depreciation and amortisation (21,245) (1,604) (22,849) (22,966) (1,600) (24,566)

Segment result 98,690 17,897 116,587 50,689 16,275 66,964

Net financing costs (20,706) (31,028)

Share of profits of associates 2,131 (42)

Non-controlling interest (2,772) (2,342)

Tax on operating profits (23,796) (9,966)

Operating profit after tax 71,444 23,586

Acquisitions that did not proceed – (2,989)

Avondale and Seven Hills Remediation provisions (991) (4,642)

Loan facility renewal costs – (862)

Nuplex US waste water discharge costs and legal costs provision (1,787) –

NZ Securities Commission legal costs provision (1,300) –

Other non–operating items 184 –

Income tax benefit on non–operating items 3,318 1,636

Reversal of writedown of Brazilian operation 687 –

Impairments and reversal thereof – (7,345) (7,345) – – –

Net profit attributable to equity holders of the parent 64,210 16,729

Net profit attributable to non–controlling interests 2,772 2,342

Profit for the period 66,982 19,071

Assets 741,780 160,981 902,761 753,759 152,091 905,850

Unallocated assets 101,533 140,899

1,004,294 1,046,749

Liabilities 240,888 55,482 296,370 211,370 41,514 252,884

Unallocated liabilities 184,594 272,243

480,964 525,127

Other segment information

Equity accounted investments included in segment assets 2,032 2,339 4,371 1,026 2,066 3,092

Capital and acquisition expenditure 9,185 5,992 15,177 18,233 673 18,906



2. segmeNt aNalysis coNtiNuedSales by Destination Non–current assets

Geographic Segments 2010 2009 2010 2009

New Zealand 145,770 158,377 48,625 48,400

Australia 568,707 569,792 182,991 191,767

Asia 278,314 255,091 53,473 57,021

Europe 331,341 355,280 122,218 160,215

Americas 135,801 155,153 24,954 28,830

Total Group 1,459,933 1,493,693 432,261 486,233

The Group does not have any one single customer that represents 10 per cent or more of the Group’s total revenues.

3. otHer iNcomeGroup Company

(NZD in thousands) 2010 2009 2010 2009

Gain on disposal of property, plant and equipment 16 125 5 52

Dividends received from subsidiaries – – 59,327 –

Commissions and fees received 829 706 – –

Rental income received 604 713 50 –

Netherlands work time reduction programme – 3,480 – –

Income received from subsidiaries – – 52 389

Reversal of writedown of Brazilian operation 687 – – –

Other 396 204 – –

2,532 5,228 59,434 441

Netherlands work time reduction programmeNuplex Resins BV recognised income of NZD3,480,000 from 12th January 2009 to 28th June 2009 under the Netherlands government work time reduction programme. The programme compensated for partial reductions of employee hours at full pay as a percentage of employee salaries. The contributions were conditional on externally reviewed financial conditions and labour union approval all of which Nuplex has met.

Dividends received from subsidiariesDividends recognised in Company other income represent the value of dividends declared by Nuplex Operations (Aust) Pty Limited and applied to intercompany loan accounts during the year.

4. otHer operatiNg expeNsesGroup Company


Loss on sale of property, plant and equipment 798 – – –

Impairment recognised on property, plant and equipment 14 7,345 – – –

Non-recurring legal costs 3,087 – – –

Site remediation costs provided 3,058 5,288 569 561

Fees associated with acquisitions that did not proceed – 2,989 – 2,566

Refinancing costs – 862 – –

Amortisation of intellectual property 2,611 3,211 – –

Restructuring and retirement 5,991 3,313 586 557

Other 15 480 1,591 77

22,905 16,143 2,746 3,761


5. persoNNel expeNses Included in cost of sales, distribution, marketing, administration and other expenses are the following personnel expenses:

Group Company


Wages and salaries 136,729 142,019 12,873 11,703

Social security contributions 8,291 9,742 724 639

Contributions to defined contribution plans 10,316 11,312 – –

Expenses related to defined benefit plans 18 1,031 1,208 – –

Increase/(decrease) in liability for leave 808 (1,431) (182) (477)

Performance share rights – (2,245) – (369)

Share loan scheme – 2,054 – (110)

Restructuring and retirement 5,991 3,313 586 557

Other benefits 2,345 3,258 – –

165,511 169,230 14,001 11,943

6. auDitors’ remuNeratioN

Group Company

(NZD in thousands) 2010 2009 2010 2009

Audit services

Auditors of the Company

KPMG Sydney:

Audit and review of financial reports 727 380 360 –

Overseas KPMG Firms:

Audit and review of financial reports 794 968 77 376

1,521 1,348 437 376

Other auditors

Audit and review of financial reports 9 18 – –

1,530 1,366 437 376

Other services

Auditors of the Company

KPMG Sydney:

Taxation services 90 82 – –

Other services – – – –

Overseas KPMG Firms:

Taxation Services 932 1,879 555 574

Other services 34 55 – 44

1,056 2,016 555 618

The lead auditors of the Group are KPMG Sydney (2009: KPMG New Zealand).



7. fiNaNcial iNcome aND expeNse

Recognised in profit and loss

Group Company

(NZD in thousands) 2010 2009 2010 2009

Interest income from outside the Group 1,046 2,112 240 509

Interest income from subsidiaries – – 3,109 1,939

Net foreign exchange gain 374 584 – –

Financial income 1,420 2,696 3,349 2,448

Interest expense 20,357 29,412 6,829 5,302

Interest paid to subsidiaries – – 69 80

Fair value of ineffective interest rate swaps transferred from equity – 1,934 – –

Foreign exchange option premiums – 850 – 850

Net foreign exchange loss 1,769 1,528 1,657 835

Financial expenses 22,126 33,724 8,555 7,067

Net financing costs 20,706 31,028 5,206 4,619

Refinancing related financial expensesThe expenses disclosed above in relation to the transfer of ineffective interest rate swaps and the foreign exchange option premium were incurred directly as a result of the reduction in loan facility balances as part of refinancing during the prior year.

Recognised directly in equityGroup Company

(NZD in thousands) 2010 2009 2010 2009

Changes in fair value of cash-flow hedges 6,999 (10,768) 911 (963)

Fair value of ineffective interest rate swaps transferred to profit and loss 1,934 – –

Change in fair value of net investment hedges 1,821 (13,534) – –

Foreign currency translation differences for foreign operations (39,483) 15,335 – –

(30,663) (7,033) 911 (963)

8. iNcome tax expeNse

Recognised in profit and loss

Group Company

(NZD in thousands) 2010 2009 2010 2009

Current tax expense

Current year 25,998 12,362 (1,745) (2,038)

Adjustments for prior years (926) (576) 82 –

25,072 11,786 (1,663) (2,038)

Deferred tax expense

Temporary differences (4,594) (3,456) 704 34

(4,594) (3,456) 704 34

Total income tax expense/(benefit) in profit and loss 20,478 8,330 (959) (2,004)


8. iNcome tax expeNse coNtiNued

Reconciliation between tax expense and pre-tax net profitGroup Company

(NZD in thousands) 2010 2009 2010 2009

Profit before tax 87,460 27,401 53,660 (10,627)

Income tax using the New Zealand corporate tax rate of 30% (2009: 30%) 26,238 8,221 16,098 (3,188)

Increase in income tax expense due to:

– Non-deductible expenses 248 1,319 88 833

– CFC Attributed income – 797 – 351

– Change in tax cost base of New Zealand buildings 571 – 571 –

– Tax losses not recognised 180 1,822 – –

Decrease in income tax expense due to:

– Dividends from subsidiaries – – (17,798) –

– Utilisation of previously unrecognised tax losses (2,369) (2,368) – –

– Effect of tax rate in foreign jurisdictions (2,352) (716) – –

– Equity earnings of associates (640) 13 – –

– Tax incentives (472) (182) – –

Under/(over) provided in prior years (926) (576) 82 –

Income tax expense/(benefit) on pre-tax net profit 20,478 8,330 (959) (2,004)

Losses generated in the Company during the year have been recognised as they are expected to be utilised against profits in other New Zealand domiciled entities in either the current or following year.

Deferred tax recognised directly in equityGroup Company

(NZD in thousands) 2010 2009 2010 2009

Fair valuation of hedge accounted derivatives (2,632) 6,710 (273) 289

(2,632) 6,710 (273) 289



9. earNiNgs per sHareThe calculation of basic earnings per share is based on:

Group

(NZD in thousands) 2010 2009

Net surplus attributable to ordinary shareholders 64,210 16,729

Weighted average number of ordinary shares (in thousands of shares):

Ordinary shares on issue at 1 July 189,798 81,719

Dividend reinvestment plan shares issued 1 April 2010 602 –

Dividend reinvestment plan shares issued 17 October 2008 – 562

Rights issue shares issued 23 April 2009 – 107,616

Call option shares issued 29 April 2009 – 16,821

Impact of rights issue and call option bonus elements on previous issues – 33,546

Impact of share consolidation – (180,198)

190,400 60,066

Basic earnings per share 0.34 0.28

The calculation of diluted earnings per share is based on:

Group


Net surplus attributable to ordinary shareholders 64,210 16,729

Interest expense on convertible notes, net of tax 3,422 3,422

Net surplus attributable to ordinary shareholders (diluted) 67,632 20,151

Basic weighted average number of ordinary shares (in thousands of shares) 190,400 60,066

Effect of conversion of convertible notes 17,772 33,293

Diluted weighted average number of ordinary shares 208,172 93,360

Diluted earnings per share 0.32 0.22

10. iNveNtories

Group Company

(NZD in thousands) 2010 2009 2010 2009

Raw materials and consumables 49,883 42,680 4,270 4,942

Finished goods 150,618 140,161 11,784 10,752

Provision for stock obsolescence (7,721) (9,173) (587) (838)

192,780 173,668 15,467 14,856

Separately identifiable unmodified purchased inventory included in the above note may be subject to a retention of title clause in the normal course of business.


11. traDe aND otHer receivables

Group Company

(NZD in thousands) 2010 2009 2010 2009

Current

Trade receivables 264,696 231,165 14,632 12,916

Other receivables and prepayments 20,987 23,792 1,081 969

Receivables due from controlled entities – – 904 448

Fair value derivatives 444 61 – –

Prepaid loan restructure fees 986 1,471 – –

287,113 256,489 16,617 14,333

Non-current

Loans to controlled entities – – 274,405 245,247

– – 274,405 245,247

The Company’s loans to controlled entities are repayable on demand and bear market interest rates with the exception of a NZD163,417,000 (2009: NZD216,824,000) loan to Nuplex Finance Holdings Limited which is non-interest bearing.

12. iNvestmeNts accouNteD for usiNg tHe equity metHoD

Investments in associates The Group has the following investments in associates:

Principal activities CountryReporting

Date Ownership 30 June

2010 2009 2008

Quaker Chemical (Australia) Pty Limited Distributor of specialty products Australia 31-Dec 49% 49% 49%

Innospec Valvemaster Limited Distributor of specialty products UK 31-Dec 50% 50% 50%

Synthese (Thailand) Co LimitedManufacture and distribution of synthetic resins Thailand 31-Dec 47.5% 47.5% 47.5%

(NZD in thousands) Revenues

(100%)Profit/(loss)

(100%)

Share of associates net profit/

(loss) recognised

Total Assets (100%)

Total Liabilities

(100%)

Net assets as

reported by associates

(100%)

Share of associate's net assets

2010

Quaker Chemical (Australia) Pty Limited 15,332 2,392 1,172 7,742 3,146 4,597 2,252

Innospec Valvemaster Limited 984 (20) (10) 546 420 126 63

Synthese (Thailand) Co Limited 30,596 2,040 969 21,230 16,491 4,739 2,056

46,912 4,412 2,131 29,518 20,057 9,462 4,371

2009

Quaker Chemical (Australia) Pty Limited 13,270 1,336 655 5,842 1,841 4,001 1,961

Innospec Valvemaster Limited 1,171 (154) (77) 697 486 211 105

Synthese (Thailand) Co Limited 26,017 (1,304) (620) 17,658 14,291 3,368 1,026

40,458 (122) (42) 24,197 16,618 7,580 3,092



12. iNvestmeNts accouNteD for usiNg tHe equity metHoD coNtiNued

Results of associates

Group


Share of associate profit before income tax 3,044 206

Share of income tax expense (913) (248)

Share of associates net profit as disclosed by associates 2,131 (42)

Share of associates net profit accounted for using the equity method 2,131 (42)

Reconciliation of investment balance

Group


Balance at 1 July 3,092 3,819

Share of associates net profit/(loss) 2,131 (42)

Dividends received (844) (738)

Exchange translation difference (8) 53

Balance at 30 June 4,371 3,092

13. DeferreD tax assets aND liabilities

Recognised deferred tax assets and liabilitiesDeferred tax assets and liabilities are attributable to the following:

GroupAssets Liabilities

(NZD in thousands) 2010 2009 2010 2009

Property, plant and equipment 163 137 20,446 26,083

Intangible assets 196 181 3,813 5,082

Receivables 1,312 893 264 319

Inventories 647 1,417 25 28

Employee benefits 6,113 7,614 – –

Payables 2,549 2,508 – –

Provisions 5,818 1,857 – –

Fair value derivatives 226 2,264 – –

Other items 3,121 5,089 157 114

Tax assets/liabilities 20,145 21,960 24,705 31,626

Set off of tax (10,752) (11,420) (10,752) (11,420)

Net tax assets/liabilities 9,393 10,540 13,953 20,206


13. DeferreD tax assets aND liabilities coNtiNued

CompanyAssets Liabilities

(NZD in thousands) 2010 2009 2010 2009

Property, plant and equipment – – 1,423 864

Intangible assets 66 63 – –

Receivables 63 63 – –

Inventories 176 251 – –

Employee benefits 558 608 – –

Payables 112 222 – –

Provisions 616 488 – –

Fair value derivatives 2 275 – –

Other items – – 84 43

Tax assets/liabilities 1,593 1,970 1,507 907

Set off of tax (1,507) (907) (1,507) (907)

Net tax assets/liabilities 86 1,063 – –

Movement in temporary differences during the yearGroup Company

2010 2009 2010 2009

Balance at 1 July (9,666) (14,684) 1,063 808

Recognised in profit or loss 4,594 3,456 (704) (34)

Recognised in equity (2,632) 2,633 (273) 289

Exchange adjustment 3,144 (1,071) – –

Balance at 30 June (4,560) (9,666) 86 1,063

Unrecognised deferred tax assetsDeferred tax assets have not been recognised in respect of the following items:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Gross value of tax losses 31,467 39,625 – –

The tax losses will not expire under local legislation, subject to the local taxpaying entities meeting any conditions relating to continuity of business and ownership.

Deferred tax assets have not been recognised in respect of these losses because it is not probable that taxable profit will be available in the immediate future against which the losses can be applied.

The losses originate in China (NZD Nil (2009: NZD3,868,000)), Brazil (NZD8,614,000 (2009: NZD8,173,000)) and the UK (NZD22,853,000 (2009: 27,584,000))



14. property, plaNt aND equipmeNt

Group

(NZD in thousands) Land andbuildings

Plant andequipment

Motorvehicles

Underconstruction Total

Cost

Balance at 1 July 2008 191,749 288,802 7,870 7,248 495,669

Additions/transfers 1,184 22,274 1,562 (6,324) 18,696

Disposals (177) (7,761) (1,062) – (9,000)

Effect of movements in foreign exchange 5,288 1,161 302 1,020 7,771

Balance at 30 June 2009 198,044 304,476 8,672 1,944 513,136

Balance at 1 July 2009 198,044 304,476 8,672 1,944 513,136

Additions/transfers 2,511 3,623 423 (343) 6,214

Disposals (573) (38,156) (1,774) – (40,503)

Effect of movements in foreign exchange (14,742) (16,176) (865) (207) (31,990)

Balance at 30 June 2010 185,240 253,767 6,456 1,394 446,857

Depreciation and impairment losses

Balance at 1 July 2008 23,406 154,967 5,614 – 183,987

Depreciation charge for the year 4,619 15,438 1,133 – 21,190

Disposals (40) (7,011) (1,058) – (8,109)

Effect of movements in foreign exchange 702 (3,972) 139 – (3,131)

Balance at 30 June 2009 28,687 159,422 5,828 – 193,937

Balance at 1 July 2009 28,687 159,422 5,828 – 193,937

Depreciation charge for the year 3,732 15,549 747 – 20,028

Impairment charge 7,345 – – – 7,345

Disposals (573) (37,351) (1,774) – (39,698)

Effect of movements in foreign exchange (2,605) (3,879) (434) – (6,918)

Balance at 30 June 2010 36,586 133,741 4,367 – 174,694

Carrying amounts

At 1 July 2008 168,343 133,836 2,256 7,248 311,682

At 30 June 2009 169,357 133,835 2,844 1,944 319,199

At 1 July 2009 169,357 133,835 2,844 1,944 319,199

At 30 June 2010 148,654 120,027 2,089 1,394 272,163


14. property, plaNt aND equipmeNt coNtiNued

Company

(NZD in thousands) Land andbuildings

Plant andequipment

Motorvehicles Total

Cost

Balance at 1 July 2008 17,057 27,436 33 44,526

Additions/transfers 9 1,072 2 1,083

Disposals – (284) – (284)

Balance at 30 June 2009 17,066 28,224 35 45,325

Balance at 1 July 2009 17,066 28,224 35 45,325

Additions/transfers 2 731 – 733

Disposals – (6) – (6)

Balance at 30 June 2010 17,068 28,949 35 46,052

Depreciation and impairment losses

Balance at 1 July 2008 1,436 22,589 22 24,047

Depreciation charge for the year 295 993 2 1,290

Disposals – (284) – (284)

Balance at 30 June 2009 1,731 23,298 24 25,053

Balance at 1 July 2009 1,731 23,298 24 25,053

Depreciation charge for the year 317 1,002 3 1,322

Disposals – (6) – (6)

Balance at 30 June 2010 2,048 24,294 27 26,369

Carrying amounts

At 1 July 2008 15,621 4,847 11 20,479

At 30 June 2009 15,335 4,926 11 20,272

At 1 July 2009 15,335 4,926 11 20,272

At 30 June 2010 15,020 4,655 8 19,683

ImpairmentThe Directors impaired the value of land holdings in the specialties segment in the year ended 30 June 2010. The Group had received indicative valuations of certain land holdings. As the valuations were less than the carrying value of the land, the Directors considered these to provide an indicator of impairment and reduced the carrying value to the estimated fair value less costs to sell.

Leased plant and machineryThe Group leases plant and equipment under a number of finance lease agreements. At 30 June 2010, the net carrying amount of leased plant and machinery was NZD1,003,000 (2009: NZD1,029,000) for the Group and NZD135,000 (2009: NZD225,000) for the Company. The leased equipment secures the underlying lease obligations (see Note 17).



14. property, plaNt aND equipmeNt coNtiNued

Assets pledged as security for loan facilityThe Group’s loan facility is secured by a charge over the Group’s Netherlands, New Zealand and Australian assets and undertakings. The net book value of the property, plant and equipment covered by that charge at 30 June 2010 was:

Group Company

Land and buildings 88,904 15,020

Plant and equipment 70,174 4,655

Motor vehicles 1,381 8

Total 160,459 19,683

15. iNtaNgible assets

Group

(NZD in thousands) Goodwill AgenciesIntellectual

Property Other Total

Cost

Balance at 1 July 2008 117,615 28,660 30,478 2,849 179,602

Other acquisitions – – – 210 210

Effect of movements in foreign exchange 5,656 – 760 (14) 6,402

Balance at 30 June 2009 123,271 28,660 31,238 3,045 186,214

Balance at 1 July 2009 123,271 28,660 31,238 3,045 186,214

Acquisitions through business combinations 499 3,177 – – 3,676

Disposals – – – (978) (978)

Other acquisitions – – – 3,646 3,646

Effect of movements in foreign exchange (8,631) – (5,501) (133) (14,265)

Balance at 30 June 2010 115,139 31,837 25,737 5,580 178,293

Amortisation and impairment losses

Balance at 1 July 2008 18,450 – 8,547 2,431 29,428

Amortisation for the year – – 3,211 165 3,376

Effect of movements in foreign exchange (210) – 226 (8) 8

Balance at 30 June 2009 18,240 – 11,984 2,588 32,812

Balance at 1 July 2009 18,240 – 11,984 2,588 32,812

Amortisation for the year – – 2,611 210 2,821

Disposals – – – (978) (978)

Effect of movements in foreign exchange (147) – (2,511) (38) (2,696)

Balance at 30 June 2010 18,093 – 12,084 1,782 31,959

Carrying amounts

At 1 July 2008 99,165 28,660 21,931 418 150,174

At 30 June 2009 105,031 28,660 19,254 457 153,402

At 1 July 2009 105,031 28,660 19,254 457 153,402

At 30 June 2010 97,046 31,837 13,653 3,798 146,334


15. iNtaNgible assets coNtiNuedCompany

(NZD in thousands) Goodwill Other Total

Cost

Balance at 1 July 2008 2,650 208 2,858

Balance at 30 June 2009 2,650 208 2,858

Balance at 1 July 2009 2,650 208 2,858

Balance at 30 June 2010 2,650 208 2,858

Amortisation and impairment losses

Balance at 1 July 2008 500 147 647

Amortisation for the year – 45 45

Balance at 30 June 2009 500 192 692

Balance at 1 July 2009 500 192 692

Amortisation for the year – 11 11

Balance at 30 June 2010 500 203 703

Carrying amounts

At 1 July 2008 2,150 61 2,211

At 30 June 2009 2,150 16 2,166

At 1 July 2009 2,150 16 2,166

At 30 June 2010 2,150 5 2,155

AgenciesAgencies disclosed above represent the fair value assessed at the time of acquisition of certain agency agreements acquired as part of the PML Holdings Limited group of companies and Med-Chem business.

Amortisation charge The amortisation charge is recognised in the following line items in profit and loss:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Administration expenses 210 165 11 45

Other operating expenses 2,611 3,211 – –

2,821 3,376 11 45



15. iNtaNgible assets coNtiNued

Impairment tests for cash generating units containing goodwill and capitalised agenciesThe following segments have significant carrying amounts of goodwill and capitalised agencies:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Resins goodwill 84,545 89,128 2,150 2,150

Specialties goodwill 12,501 15,903 – –

Specialties agencies 31,837 28,660 – –

128,883 133,691 2,150 2,150

For the purposes of impairment testing, goodwill and agencies are allocated to the groups operating divisions which represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

The recoverable amount of each cash-generating unit is based on value in use calculations. Those calculations use cash flow projections based on actual operating results, budgets and forecasts.

Key budget and forecast assumptions, including market growth rates, wages growth rates and inflation are set based on independent economic forecasts for each relevant jurisdiction and approved at Board level.

Detailed budgets and forecast cash flows are prepared for a two year period and are extrapolated for a further 8–18 year period using the following growth rates, in accordance with current business plans and forecasts and with reference to long term independent economic forecasts.

Growth rate assumptions:

Australian Resins 0–1.9%

New Zealand Resins 0–2%

Australia and New Zealand Specialties 0–3%

Europe Resins 2%

Americas Resins 1%

Asia Resins 3%

The period over which cash-flows are considered for each region is consistent with the Group’s long term commitment and certainty of cash-flows in each region. The following pre-tax discount rates have been used in discounting the projected cash flows:

Discount rates Used:

New Zealand 16.6%

Australia 14.8%

Europe 14.7% – 15.1%

Americas 14.8%

Asia 14.6%

The calculations for each cash-generating unit show varying degrees of headroom over carrying value, however, based on the analysis performed there are no impairment issues necessitating a write-down of goodwill and in particular given either a 2% increase in discount rate or a 2% reduction in growth rates no impairment would be required.


16. traDe aND otHer payables

Group Company

(NZD in thousands) 2010 2009 2010 2009

Trade payables and accrued expenses 237,503 196,223 12,335 9,488

Trade payables and accruals owed to subsidiaries – – 2,977 3,064

Fair value derivatives 1,232 7,667 5 918

238, 735 203,890 15,317 13,470

17. iNterest-beariNg loaNs aND borrowiNgsThis note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see Note 21.

Group Company

(NZD in thousands) 2010 2009 2010 2009

Current liabilities

Current portion of finance lease liabilities 356 475 74 73

356 475 74 73

Non-current liabilities

Secured bank loans 101,340 195,307 – –

Capital notes 52,568 52,417 52,568 52,417

Finance lease liabilities 159 494 91 154

154,067 248,218 52,659 52,571

Financing facilities


Facilities utilised at reporting date


Facilities not utilised at reporting date




17. iNterest-beariNg loaNs aND borrowiNgs coNtiNued

Terms and debt repayment scheduleThe terms and conditions of outstanding loans were as follows:

Nominal interest rate 2010 2009

(NZD in thousands) Currency 2010 2009

MaturityFace value

Carrying amount

Face value

Carrying amount

Capital Notes NZD 9.30% 9.30% Sep–12 52,568 52,568 52,568 52,417

Cash advance facility loan USD 1.71% 2.35% Mar–12 19,543 19,543 21,030 21,030

Cash advance facility loan USD 1.88% 2.54% Mar–12 2,012 2,012 9,432 9,432

Cash advance facility loan AUD 6.15% 4.74% Mar–12 68,906 68,906 98,774 98,774

Cash advance facility loan AUD – 4.74% Mar–12 – – 46,401 46,401

Cash advance facility loan EUR 2.16% 3.60% Mar–12 8,769 8,769 10,860 10,860

Cash advance facility loan CNY 5.10% 5.76% Mar–12 2,110 2,110 8,810 8,810

Total interest bearing liabilities 153,908 153,908 247,875 247,724

Financing arrangements

Capital notesThe capital notes have an election date of 15 September 2012, at which point the Company can redeem for cash or roll over the notes on revised terms. Unless the Company has given notice that it will redeem all capital notes, noteholders must elect to retain some or all of their notes on revised terms or convert some or all notes to shares. Despite a noteholders election, the Company can elect to redeem for cash some or all of the notes. The capital notes have an interest rate of 9.3% per annum.

Revolving multi-currency cash advance facilitiesBank loans are denominated in Australian Dollars, Euro, US Dollars and Chinese Yuan (refer Note 21). The overall facility limit is denominated in AUD and is AUD300,000,000 (2009: AUD350,000,000).

The bank loans are secured by a charge over the Group’s Netherlands, New Zealand and Australian assets and undertakings.

The bank loans are also secured by a negative pledge whereby Nuplex Industries Limited and a guaranteeing group of its subsidiary companies undertake to the lenders that they will not create or allow to continue any security interest over any part of its property other than in limited circumstances. The guaranteeing group comprises all wholly owned subsidiary companies except Nuplex Resins (Foshan) Co Limited, Nuplex Resins (Suzhou) Co Limited, Nuplex Resins (Thailand) Limited, Nuplex Industries (Hong Kong) Limited and Nuplex Producao de Resinas Ltda.

Loans are drawn on a revolving facility and are drawn for periods of 1, 2, 3 or 6 months under the facilities and interest accrues at a rate fixed on the date of drawdown for that period. The facilities have a maturity of 31 March 2012.

The Group’s borrowings are subject to various covenants pursuant to the financing arrangements with the Group’s bank lenders. The Group has not been in compliance with a covenant regarding the Guaranteeing Group EBIT ratio, and the Group’s bank lenders provided a waiver in respect of compliance with this ratio for the year.


17. iNterest-beariNg loaNs aND borrowiNgs coNtiNued

Finance lease liabilities Finance lease liabilities of the Group and Company are payable as follows:

Group Company

(NZD in thousands)

Minimum lease

payments Principal Interest

Minimum lease

payments Principal Interest

2010

Less than one year 396 356 40 99 91 8

Between one and five years 172 159 13 78 74 4

568 515 53 177 165 12

2009

Less than one year 512 475 37 77 73 4

Between one and five years 524 494 30 162 154 8

1,036 969 67 239 227 12

The Group leases equipment under finance leases expiring from one to five years.

18. employee provisioNs

Group Company

(NZD in thousands) 2010 2009 2010 2009

Current

Bonus provisions 9,184 3,835 366 155

Liability for annual leave 9,770 10,883 885 782

Redundancy 2,427 185 – –

Other 2,204 2,608 – –

23,585 17,511 1,251 937

Non-Current

Present value of unfunded obligations 14,054 15,233 – –

Present value of funded obligations 2,010 1,990 – –

Fair value of plan assets (1,796) (1,626) – –

Present value of net obligations 14,268 15,597 – –

Unrecognised actuarial amounts (857) (218) – –

Recognised liability for defined benefit obligations (see below) 13,411 15,379 – –

Liability for long-service leave 8,218 7,962 388 666

Other 1,784 1,503 229 425

Total non-current employee benefits 23,413 24,844 617 1,091

The movement in the redundancy provision included utilisations of NZD635,000.



18. employee provisioNs coNtiNued

a. Liability for defined benefit obligationThe Group makes contributions to three defined benefit plans that provide benefits for employees upon retirement. The plans include retirement schemes in The Netherlands and New Zealand and a United States medical scheme.

Plan assests consist of the following:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Equity securities 916 894 – –

Property 180 179 – –

Fixed interest 611 537 – –

Other 89 16 – –

1,796 1,626 – –

None of the plans hold any investments in Nuplex shares.

Movements in the net liability for defined benefit obligations:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Net liability for defined benefit obligations at 1 July 17,223 17,892 – –

Benefits paid (1,452) (3,162) – –

Current service costs and interest 1,000 1,029 – –

Actuarial gain/(loss) 747 – – –

Exchange adjustment (1,454) 1,464 – –

Net liability for defined benefit obligations at 30 June 16,064 17,223 – –

Movements in plan assets:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Fair value of plan assets at 1 July 1,626 2,205 – –

Employer contributions paid into the plan 88 98 – –

Participant contributions paid into the plan 42 46 – –

Benefits paid by the plan – (544) – –

Expected return on plan assets 84 113 – –

Actuarial gain/(loss) (44) (292) – –

1,796 1,626 – –

Expense recognised in profit and loss:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Current service costs (308) (403) – –

Interest on obligation (692) (903) – –

Expected return on plan assets 84 113 – –

Amortisation of actuarial gains/(losses) (115) (15) – –

(1,031) (1,208) – –


18. employee provisioNs coNtiNuedThe expense is recognised in the following lines in profit and loss:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Marketing expenses (81) (66) – –

Administration expenses (950) (1,142) – –

(1,031) (1,208) – –

It is expected that the Group will make contributions to plans of NZD82,000 and pay benefits from the plans of NZD3,013,000 in the year ended 30 June 2011.

Actuarial Assumptions:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Discount rate 3.80 to 6.00% 4.20 to 6.00% – –

Return on plan assets 5.00% 5.50% – –

Social security increases 2.00% 2.00% – –

Pension increases 2.00 to 9.20% 2.00 to 9.00% – –

Salary increases 0 to 4.00% 0 to 4.00% – –

The overall expected long-term rate of return on assets is 5.0 percent. The expected return on assets is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each asset class.

Trend data 2010 2009 2008 2007 2006

Defined benefit obligation (16,064) (17,223) (17,892) (16,563) (19,128)

Assets of the plans 1,796 1,626 2,205 2,438 2,274

Net obligation (14,268) (15,597) (15,687) (14,125) (16,854)

Experience adjustments arising on plan assets 44 292 259 (75) (203)

Experience adjustments arising on plan liabilities (184) (184) (293) 1,219 (287)

19. provisioNs Group Company

(NZD in thousands) Site

restoration Other TotalSite

restoration Total

Balance at 1 July 2009 6,112 527 6,639 1,625 1,625

Provisions made during the year 3,061 2,631 5,692 569 569

Provisions used or reversed during the year (1,126) (481) (1,607) (139) (139)

Exchange rate adjustment (91) 4 (87) – –

Balance at 30 June 2010 7,956 2,681 10,637 2,055 2,055

2010

Current 7,956 2,681 10,637 2,055 2,055

Non-current – – – – –

Total 7,956 2,681 10,637 2,055 2,055

2009

Current 6,112 109 6,221 1,625 1,625

Non-current – 418 418 – –

Total 6,112 527 6,639 1,625 1,625



19. provisioNs coNtiNued

Site restoration Provisions for site restoration are made where the Group has an obligation to remediate a site on which contamination has occurred. Provisions are based upon prior experience and surveyors reports. The amounts are expected to be utilised within the year.

OtherOther provisions include provisions for costs to defend legal claims and in the prior year for deferred consideration on acquisitions as detailed in Note 26.

20. capital aND reserves

Reconciliation of movement in capital and reservesAttributable to equity holders of the parent Non-

controlling Interest

Total Equity (NZD in thousands)

Share capital

Translation reserve

Retained earnings


Group

Balance at 1 July 2008 183,562 23,973 148,314 735 356,584 8,477 365,061

Total recognised income and expense – 4,956 16,729 (6,184) 15,501 3,247 18,748

Shares issued 158,382 – – – 158,382 – 158,382

Dividends paid – – (18,795) – (18,795) (1,774) (20,569)

Balance as at 30 June 2009 341,944 28,929 146,248 (5,449) 511,672 9,950 521,622

Balance at 1 July 2009 341,944 28,929 146,248 (5,449) 511,672 9,950 521,622

Total recognised income and expense – (37,861) 64,210 4,913 31,262 2,425 33,687

Shares issued 7,720 – – – 7,720 – 7,720

Dividends paid – – (35,113) – (35,113) (4,586) (39,699)

Balance as at 30 June 2010 349,664 (8,932) 175,345 (536) 515,541 7,789 523,330

(NZD in thousands)Share

capitalRetained earnings


Company

Balance at 1 July 2008 183,562 108,452 (145) 291,869

Total recognised income and expense – (8,623) (674) (9,297)

Shares issued 158,382 – – 158,382

Dividends paid – (18,795) – (18,795)

Balance as at 30 June 2009 341,944 81,034 (819) 422,159

Balance at 1 July 2009 341,944 81,034 (819) 422,159

Total recognised income and expense – 54,619 638 55,257

Shares issued 7,720 – – 7,720

Dividends paid – (35,113) – (35,113)

Balance as at 30 June 2010 349,664 100,540 (181) 450,023


20. capital aND reserves coNtiNued

Share capital(In thousands of shares) (NZD in thousands)

2010 2009 2010 2009

Company and Group

Fully paid ordinary shares

On issue at 1 July 189,798 81,719 341,944 183,562

Dividend reinvestment plan 2,435 802 7,720 4,755

Rights Issue – 577,644 – 126,890

Call option – 99,025 – 26,737

Share consolidation – (569,392) – –

On issue at 30 June 192,233 189,798 349,664 341,944

The holders of ordinary shares are entitled to receive dividends as declared from time to time, are entitled to one vote per share at meetings of the Company and participate equally on winding up of the Company.

Rights issue and call optionOn 23 April 2009 the Company issued for cash 577,643,738 shares at an issue price of NZD0.23 per share under a seven for one renounceable rights issue. Proceeds from the issue were NZD132,858,059 and associated transaction costs deducted from share capital were NZD5,968,000.

In connection with the rights issue the Company granted a call option to First NZ Capital Securities Limited under which 99,024,640 shares were issued on 29 April 2009 at a price of NZD0.27 per share, realising proceeds of NZD26,736,652.

Share consolidationOn 18 June 2009 the Company consolidated all its ordinary shares on a 1 for 4 basis.

Translation reserveThe translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the functional currency of the reporting entity, as well as from the translation of liabilities designated as hedges of the Company’s net investment in a foreign subsidiary.

Hedging reserveThe hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

DividendsDividends recognised in the current and previous years by the Company are as follows:

2010 2009

(NZD in thousands) Cents per

shareTotal

amount

Imputation cents per

shareDate of

paymentCents per

shareTotal

amount


shareDate of

payment

Interim current year ordinary 10.0 18,980 Nil Apr-10 – – – –

Final prior year special 3.5 6,643 Nil Oct-09 – – – –

Final prior year ordinary 5.0 9,490 Nil Oct-09 23.0 18,795 Nil Oct-08

Total amount 18.5 35,113 23.0 18,795

Dividends include tax credits from the Company’s Imputation Credit Account as noted above. Dividends also include Australian franking credits at the maximum rate for prior year dividends and 80% of the maximum rate for the current year interim dividend.

After the balance sheet date the following dividends were proposed by the directors. The dividends have not been provided.



20. capital aND reserves coNtiNued

(NZD in thousands) Cents per

shareTotal

amount


shareDate of

payment

Final Dividend 11.0 21,146 Nil 8 October 2010

Imputation creditsGroup



Prior year adjustment (151) (22)

Tax paid/(refunded) and interest applied (622) (490)

Balance at 30 June 1,915 2,688

The Company is part of a New Zealand tax group with the Group’s other New Zealand domiciled entities, the imputation credit balance presented above represents that of the Group.

Australian franking credits

(AUD in thousands) 2010 2009


Franking credits attached to dividends received 294 254

Tax paid 1,872 5,921

Franking credits attached to dividends paid (20,684) –

Balance at 30 June 927 19,445

21. fiNaNcial risk maNagemeNtExposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. This note presents information about the Group’s exposure to those risks, the objectives, policies and processes for measuring and managing financial risks, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are set to identify and analyse the risks faced by the Group, to set appropriate limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Board oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to risks faced by the Group.

Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

Trade and other receivablesThe Group has a credit policy which restricts the exposure to individual trade debtors. Each new customer is analysed for creditworthiness before the Group offers payment and delivery terms. The review includes external ratings where available. Credit limits are established for each customer, representing the maximum open amount without requiring approval from senior management or the board. The Board of Directors reviews the exposure to trade debtors on a regular basis.

Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The Group does not require collateral in respect of trade receivables.

GuaranteesThe Company has issued a guarantee to HSBC to enable associate company Synthese Thailand Co Limited to borrow up to USD5.6million, as detailed in Note 24.


21. fiNaNcial risk maNagemeNt coNtiNuedThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Trade and other receivables 286,669 256,428 15,713 13,885

Cash and cash-equivalents 82,063 119,499 12,424 13,190

Forward exchange contracts used for hedging:

Assets 444 61 – –

369,176 375,988 28,137 27,075

The maximum exposure to credit risk for financial assets at the reporting date by geographic region was:

Group Company

(NZD in thousands) 2010 2009 2010 2009

New Zealand 43,954 41,463 25,023 24,619

Australia 122,286 128,211 508 143

Americas 30,393 35,863 – –

Europe 98,397 97,982 4 –

Asia 74,146 72,469 2,602 2,313

369,176 375,988 28,137 27,075

The aging of trade receivables at the reporting date was:

Group Company

(NZD in thousands)Gross

2010Impairment

2010Gross 2009

Impairment 2009

Gross 2010

Impairment 2010

Gross 2009

Impairment 2009

Not past due 233,392 (2,640) 201,483 (228) 13,072 – 10,772 –

Past due 0-30 days 23,243 – 25,400 (560) 1,338 – 1,500 –

Past due 31-90 days 8,523 – 4,797 (5) 119 – 468 –

Past due 91 days or more 4,186 (2,009) 4,290 (4,012) 464 (361) 385 (209)

Total 269,345 (4,649) 235,970 (4,805) 14,993 (361) 13,125 (209)

The movement in the allowance for impairment in respect of trade receivables during the year was:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Balance at 1 July 4,805 1,869 209 61

Impairment loss recognised 1,803 6,138 154 798

Utilisation of existing provisions (1,743) (3,210) (2) (650)

Exchange adjustment (216) 8

Balance at 30 June 4,649 4,805 361 209

Included in Group trade receivables are amounts totalling NZD4,225,000 (2009: NZD756,000) not past due having been renegotiated.



21. fiNaNcial risk maNagemeNt coNtiNued

Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures as far as possible that it maintains sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

In addition to the group debt facility companies in the Group maintain operating credit facilities for day to day operational purposes.

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting arrangements:

Group

(NZD in thousands)Carrying amount

Contractual cash flows

6 months or less

6–12 months

1–2 years

2–5 years

2010

Non-derivative financial liabilities

Secured bank loans 101,340 112,239 3,114 3,114 106,011 –

Capital notes 52,568 63,364 2,444 2,444 4,889 53,587

Finance lease liabilities 515 568 198 198 135 37

Trade and other payables 237,503 237,503 237,503 – – –

Derivative financial liabilities

Interest rate swaps 1,136 1,076 970 155 (49) –

Forward exchange contracts

– Outflow 96 46,170 45,237 933 – –

– Inflow (444) (47,302) (46,382) (920) – –

392,714 413,616 243,084 5,924 110,986 53,624

2009


Secured bank loans 340,482 363,120 5,343 5,343 66,088 286,346

Capital notes 52,417 68,252 2,444 2,444 4,889 58,475

Finance lease liabilities 969 1,036 256 256 374 150



Interest rate swaps 4,315 4,380 1,860 1,517 1,208 (205)


– Outflow 3,352 40,914 39,497 1,417 – –

– Inflow – (37,771) (36,409) (1,362) – –

597,758 636,154 209,214 9,615 72,559 344,766



Company



6 months or less

6–12 months

1–2 years

2–5 years

2010


Capital notes 52,568 63,364 2,444 2,444 4,889 53,587





– Outflow 5 6,070 6,070 – – –

– Inflow – (6,121) (6,121) – – –

68,050 78,802 17,755 2,494 4,944 53,609

2009


Capital notes 52,417 68,252 2,444 2,444 4,889 58,475





– Outflow 918 8,478 8,478 – – –

– Inflow – (7,633) (7,633) – – –

66,114 81,888 15,879 2,482 5,006 58,521



21. fiNaNcial risk maNagemeNt coNtiNuedThe following table indicates the periods in which the cash-flows associated with derivatives that are cash-flow hedges are expected to occur:

Group


Expected cash flows

6 months or less

6–12 months

1–2 years

2–5 years

2010

Interest rate swaps

Liabilities (1,136) (1,076) (970) (155) 49 –


Assets 444 47,302 46,382 920 – –

Liabilities (96) (46,170) (45,237) (933) – –

(788) 56 175 (168) 49 –

Group



6 months or less

6–12 months

1–2 years

2–5 years

2009

Interest rate swaps

Liabilities (4,315) (4,380) (1,860) (1,517) (1,208) 205


Assets 61 37,771 36,409 1,362 – –

Liabilities (3,352) (40,914) (39,497) (1,417) – –

(7,606) (7,523) (4,948) (1,572) (1,208) 205

Company


Expected cash flows

6 months or less

6–12 months

1–2 years

2–5 years

2010


Assets – 6,121 6,121 – – –

Liabilities (5) (6,070) (6,070) – – –

(5) 51 51 – – –

Company



6 months or less

6–12 months

1–2 years

2–5 years

2009


Assets – 7,633 7,633 – – –

Liabilities (918) (8,478) (8,478) – – –

(918) (845) (845) – – –


21. fiNaNcial risk maNagemeNt coNtiNuedThe following table indicates the periods in which the cash-flows associated with derivatives that are cash-flow hedges are expected to impact profit and loss:

Group

(NZD in thousands) Carrying amount

Expected cash flows

6 months or less

6–12 months

1–2 years

2–5 years

2010

Interest rate swaps

Liabilities (1,136) (1,075) (1,025) (109) 59 –


Assets 444 47,302 46,382 920 – –

Liabilities (96) (46,170) (45,237) (933) – –

(788) 57 120 (122) 59 –

Group



6 months or less

6–12 months

1–2 years

2–5 years

2009

Interest rate swaps

Liabilities (4,315) (4,380) (1,677) (1,477) (1,229) 3


Assets 61 37,771 36,409 1,362 – –

Liabilities (3,352) (40,914) (39,497) (1,417) – –

(7,606) (7,523) (4,765) (1,532) (1,229) 3

Company


Expected cash flows

6 months or less

6–12 months

1–2 years

2–5 years

2010


Assets – 6,121 6,121 – – –

Liabilities (5) (6,070) (6,070) – – –

(5) 51 51 – – –

Company



6 months or less

6–12 months

1–2 years

2–5 years

2009


Assets – 7,633 7,633 – – –

Liabilities (918) (8,478) (8,478) – – –

(918) (845) (845) – – –




Market riskThe Group is exposed to the risk that changes in foreign exchange rates and interest rates will affect the Group’s income or value of financial instruments. The objective of managing these risks is to control exposures within acceptable parameters while optimising the impact on return.

The Group utilises forward currency contracts and interest rate swaps in the ordinary course of business in order to manage these risks. All such transactions are carried out within the guidelines of the Group’s Treasury policy as set by the Board. The Group applies hedge accounting where permitted in order to limit volatility in profit and loss.

Capital managementDuring the prior year, additional capital of NZD153,627,000 was raised by way of a Rights Issue and subsequent placement. The new capital was used to repay bank debt.

The Group’s capital structure comprises a mixture of equity, capital notes, bank debt of varying tenure and cash.

The structure gives a balance between costs of each component, the liquidity risk, the quantum of unused facilities and tenure such that the Group has adequate facilities available at all times to meet its short and medium term cash needs for operations, capital expenditure, financing and pursuit of growth opportunities.

Interest rate riskThe Group has adopted a policy of ensuring that 40-100% of its exposure to interest rates to reset within a year is fixed, that 30-80% of its exposure to rates to reset from one to three years time is fixed and that 0-60% of exposure to rates to reset from three to five years time is fixed. The Board monitors compliance with this policy by reference to status reports from independent treasury consultants.

Interest rate swaps are used to convert the interest in floating rate borrowings to a fixed rate. The notional principal or contract amounts of swap instruments outstanding at balance date are as follows:


Net interest rate swaps

Group 97,999 114,911

Company – –

The Group classifies interest rate swaps as cash flow hedges and states them at fair value. The swaps are taken out for a period of three years to reprice consistent with the underlying borrowings they hedge.

Interest rate risk profile

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Fixed rate instruments

Financial Liabilities 151,082 168,297 52,733 52,644

(151,082) (168,297) (52,733) (52,644)

Variable rate instruments

Financial Assets 82,063 119,499 12,424 13,190

Financial Liabilities 3,341 80,396 – –

78,722 39,103 12,424 13,190



Sensitivity analysis A change of 100 basis points in interest rates at the reporting date would have impacted equity and profit by the amounts shown below. The analysis assumes all other variables remain constant. The analysis is performed on the same basis for 2009.

Group Company

(Impact NZD in thousands)Equity

2010Profit 2010

Equity 2009

Profit 2009

Equity 2010

Profit 2010

Equity 2009

Profit 2009

100bp increase

Variable rate instruments – 791 – 606 – 124 – 132

Interest rate swaps 280 – 1,095 – – – – –

Cash-flow sensitivity (net) 280 791 1,095 606 – 124 – 132

100bp decrease

Variable rate instruments – (791) – (606) – (124) – (132)

Interest rate swaps (284) – (1,123) – – – – –

Cash-flow sensitivity (net) (284) (791) (1,123) (606) – (124) – (132)

Effective interest rates and repricing analysisIn respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.

Group

(NZD in thousands)

Effective interest

rate

Amount of interest

rate hedged Total

6 months or less

6–12 months 1–2 years 2–5 years

2010

Cash and cash equivalents 1.53 – 82,063 82,063 – – –

Secured bank loans:

AUD loan 6.46 67,676 (68,906) (68,906) – – –

EUR loan 4.40 8,769 (8,769) (8,769) – – –

USD loan 3.73 21,555 (21,555) (21,555) – – –

CNY loan 5.10 – (2,110) (2,110) – – –

Capital notes 9.30 – (52,568) – – – (52,568)

Finance lease liabilities (515) – (356) (159) –

(72,360) (19,277) (356) (159) (52,568)



21. fiNaNcial risk maNagemeNt coNtiNuedGroup

(NZD in thousands)

Effective interest

rate

Amount of interest

rate hedged Total

6 months or less


2009


Secured bank loans:

AUD loan 5.69 80,856 (145,175) (145,175) – – –

EUR loan 4.40 10,860 (10,860) (10,860) – – –

USD loan 3.42 23,195 (30,462) (30,462) – – –

CNY loan 5.76 – (8,810) (8,810) – – –

Capital notes 9.30 – (52,417) – – – (52,417)


(129,194) (75,808) (475) (494) (52,417)

Company

(NZD in thousands)

Effective interest

rateAmount hedged Total

6 months or less


2010


Capital notes 9.30 – (52,568) – – – (52,568)


(40,309) 12,424 (91) (74) (52,568)

2009


Capital notes 9.30 – (52,417) – – – (52,417)


(39,454) 13,190 (73) (154) (52,417)

Currency riskThe Group has exposure to foreign exchange risk as a result of transactions in currencies other than the functional currency of the transacting Group entity. The Group uses forward exchange instruments to manage elements of these exposures. Significant exposures occur primarily in USD, EUR and AUD.

The Group aims to cover 80-100% of its 3 month forecast net currency exposure, up to 50% of its 4-6 month net exposure and up to 25% of its 7-12 month net exposure.

Interest on borrowings is denominated in currencies that match the cash-flows generated by the underlying operations of the Group. This provides an economic hedge and no derivatives are entered into in this respect.

Forecasted transactionsThe Group hedge accounts its forward exchange contracts. These contracts are fair valued and any effective portion of hedge valuation movement is shown in the statement of changes in equity. The net fair value of these forward exchange contracts at 30 June was NZD348,000 (2009: (NZD3,291,000)), comprising assets of NZD444,000 (2009: NZD 61,000), and liabilities of NZD96,000 (2009: NZD3,352,000) that were recognised in fair value derivatives. Contracts are taken out for periods of 1 to 12 months depending upon the timing of the anticipated foreign currency purchases that the contracts hedge.



Hedge of net investments in foreign subsidiariesThe Group has designated three loans as hedges of the Groups net investments in foreign subsidiaries as detailed below:

SubsidiaryLoan

Currency

Loan Principal

(Ccy)

Carrying amount

(NZD)

Exchange loss recognised

in equity

Nuplex Industries Australia Pty Ltd for Nuplex Resins (Foshan) Co Ltd and Cong Ty Nuplex Resins (Vietnam) USD 1,400,000 2,011,783 234,502

Nuplex US Holdings Limited for Nuplex Resins LLC USD 13,600,000 19,543,038 1,040,000

Exposure to currency riskThe Group’s exposure to foreign currency risk was as follows based on notional amounts:

Group

AUD 2010

USD 2010

EUR 2010

AUD 2009

USD 2009

EUR 2009

Non functional currency amounts

Trade receivables and cash balances 596 23,408 16,980 941 20,693 15,976

Trade Payables (3,663) (20,739) (19,013) (2,944) (20,368) (25,517)

Gross statement of financial position exposure (3,067) 2,669 (2,033) (2,003) 325 (9,541)

Subsidiary net assets 239,228 79,045 124,711 186,981 93,652 163,199

Forward exchange contracts 1,650 43,837 7,139 685 36,022 3,577

Statement of financial position exposure 237,811 125,551 129,817 185,663 129,999 157,235

Profit in functional currency 29,717 13,026 4,537 10,901 9,672 (2,253)

Company

AUD 2010

USD 2010

EUR 2010

AUD 2009

USD 2009

EUR 2009

Trade receivables and cash balances 242 6,114 150 860 1,276 36

Trade Payables (2,819) (1,726) (202) (1,019) (2,791) (296)

Gross statement of financial position exposure (2,577) 4,388 (52) (159) (1,515) (260)

Forward exchange contracts 1,100 4,198 524 179 8,108 74

Statement of financial position exposure (1,477) 8,586 472 20 6,593 (186)

The following significant exchange rates applied during the year:

Average rateReporting date mid-spot rate

2010 2009 2010 2009

USD 0.70 0.60 0.70 0.65

AUD 0.80 0.82 0.81 0.80

EUR 0.51 0.44 0.57 0.46




Sensitivity analysisA 10% strengthening of the NZD against the following currencies at 30 June would have impacted equity and profit by the amounts shown below. The analysis assumes all other variables remain constant. The analysis is performed on the same basis for 2009.

Group Company

Increase/(Decrease) (NZD in thousands)

Equity 2010

Profit 2010

Equity 2009

Profit 2009

Equity 2010

Profit 2010

Equity 2009

Profit 2009

AUD (24,039) (2,665) (18,759) (890) (97) 258 (16) 16

EUR (12,597) (250) (16,422) 1,179 (46) 5 (7) 26

USD (6,628) (1,569) (8,280) (1,000) (391) (439) (659) 152

A 10% weakening of the NZD would have had an equal but opposite impact.

Fair values The fair values together with the carrying amounts shown in the statement of financial position are as follows:

Group

(NZD in thousands) NoteAt fair value

Loans and receivables

Other amortised

costCarrying amount Fair value

2010

Trade and other receivables 11 – 286,669 – 286,669 286,669

Cash and cash equivalents – 82,063 – 82,063 82,063

Interest rate swaps:

– Liabilities (1,136) – – (1,136) (1,136)

Forward exchange contracts:

– Assets 444 – – 444 444

– Liabilities (96) – – (96) (96)

Secured bank loans 17 – – (101,340) (101,340) (101,340)

Capital notes 17 – – (52,568) (52,568) (56,619)

Finance lease liabilities 17 – – (515) (515) (519)

Trade and other payables 16 – – (237,503) (237,503) (237,503)

(788) 368,732 (391,926) (23,982) (28,037)

Unrecognised (losses)/gains (4,055)

2009



Interest rate swaps:

– Liabilities (4,315) – – (4,315) (4,315)


– Assets 61 – – 61 61

– Liabilities (3,352) – – (3,352) (3,352)

Secured bank loans 17 – – (195,307) (195,307) (195,307)

Capital notes 17 – – (52,417) (52,417) (57,337)



(7,606) 375,927 (444,916) (76,595) (81,508)



Company

(NZD in thousands) NoteAt fair value

Loans and receivables

Other amortised

costCarrying amount Fair value

2010




– Liabilities (5) – – (5) (5)

Capital notes 17 – – (52,568) (52,568) (56,619)



(5) 29,041 (68,045) (39,009) (43,057)


2009




– Liabilities (918) – – (918) (918)

Capital notes 17 – – (52,417) (52,417) (57,337)



(918) 27,523 (65,196) (38,591) (43,509)


Estimation of fair values The methods used in determining fair values of financial instruments are discussed in Note 1(y).

NZ IFRS 7 dictates a heirarchy of valuation methods for determining the fair value of financial instruments, as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: Inputs for the asset or liability that are not based on observable market data.

All of the Group and Company assets and liabilities valued at fair value are valued using level 2 methods.

Interest rates used for determining fair valueThe entity uses the government yield curve as of 30 June 2010 plus an adequate constant credit spread to discount financial instruments. The interest rates used are as follows:

2010 2009

Capital notes 4.1% 4.5%

Leases 10% – 12% 10% – 12%

Interest rate swaps 0.4% – 5.0% 0.6% – 6.4%

All assets and liabilities measured at fair value are valued using inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices)



22. operatiNg leasesNon-cancellable operating lease rentals are payable as follows:

Group Company

(NZD in thousands) 2010 2009 2010 2009

Less than one year 7,359 7,924 1,809 1,830

Between one and five years 8,013 10,520 2,952 3,188

More than five years 11,522 11,364 11,520 11,161

26,894 29,808 16,281 16,179

The Group leases a number of warehouse and factory facilities under operating leases. The leases typically run for a period of 5 years, with an option to renew the lease after that date. None of the leases include contingent rentals.

During the year ended 30 June 2010, NZD10,935,000 was recognised as an expense in profit and loss in respect of operating leases (2009: NZD12,602,000).

23. capital aND otHer commitmeNts

Group Company

(NZD in thousands) 2010 2009 2010 2009

Plant and equipment contracted but not provided for and payable:

Within one year 975 1,230 – –

975 1,230 – –

24. coNtiNgeNt liabilities

New Zealand securities commission actionThe NZSC commenced civil proceedings against the Company and directors in April 2010 alleging a breach of the continuous disclosure obligations of the Securities Markets Act in late 2008 to early 2009. The NZSC alleges that Nuplex should have disclosed an alleged forecast and actual breach of a non-monetary covenant in its banking facility agreements. The NZSC seeks compensation orders up to a maximum of approximately NZD5.3 million, and pecuniary penalties. Nuplex considers that it complied with the continuous disclosure obligations, denies each of the allegations of breach, and is taking all appropriate action to defend the claim.

US class action Two individuals in Kentucky filed a class action in March 2010 alleging contamination of the area surrounding the plant of a wholly owned subsidiary in Louisville Kentucky. The plaintiffs claim to represent a group of local residents. The claim does not specify an amount of damages.

US income tax A wholly owned subsidiary in the USA has been the subject of an audit of its 2007 income tax return. The IRS process is not yet completed, but at this stage of the process the IRS has indicated that it believes there is additional tax owing of approximately USD14,000,000 plus any fines and penalties that may be imposed. Nuplex considers that it has appropriately applied the applicable tax regulations, that no additional tax is payable, and is defending its position. As at the date of preparation of these financial statements, the IRS has not imposed any obligation on Nuplex to pay any tax in relation to this matter.

Negative pledge deedThe Company and all the material wholly owned subsidiaries have entered into a negative pledge deed with the Group’s lenders whereby all Group companies that are party to the deed have guaranteed the repayment of all liabilities in the event that any of these companies are wound up.

HSBC guaranteeThe Company has issued a guarantee to HSBC to enable associate company Synthese Thailand Co Limited to borrow up to USD5.6million (2009: USD5.6million). Nuplex has discharged the JV partner Thai Urethane Plastic Co Limited from its indemnity against 48% of all losses, costs, damages, expenses, claims and demands which may be incurred or sustained by reason or on account of having given the guarantee. Nuplex granted this discharge as part of its commitment to increase the funds available to Synthese Thailand Co Limited to meet an obligation to purchase plant and equipment from Thai Urethane Plastic Co Limited. This transaction was executed in January 2008.

Weathertight homes resolutionPlaster Systems Limited (PSL) has been notified of various claims against the Company under the Weathertight Homes Resolution Services Act 2002. PSL has provided for the costs of settlement of these claims as a current provision. PSL has denied liability for damages under these claims but has participated in the settlement process and contributed towards remediation as determined by the adjudicator without reverting to its full legal remedies as a gesture of good faith and to protect the reputation of its products suitability for purpose.

The directors consider that no further provisions are required in respect of these matters as they are considered unlikely to result in future liability and/or the quantum of any future liability is not capable of reliable measurement.


25. iNvestmeNtsThe subsidiary and associate companies comprise:

Country of

Principal Activity Directors **Incorporation other than NZ

% Held

2010 2009

Asia Pacific Specialty Chemicals Limited

Manufacturer and supplier of specialty products, additives and ingredients

1, 2, 7 Australia 100% 100%

Cong Ty Nuplex Resins (Vietnam) Manufacture and distribution of synthetic resins 1, 2, 3, 11 Vietnam 100% 100%

Nuplex Finance Holdings Limited Investment and group finance company 2, 7 100% 100%

Nuplex Industries (Aust) Pty Limited Manufacture, import and distribution of synthetic resins and emulsions, metal driers, paper-making chemicals and food ingredients

2, 10 Australia 100% 100%

Nuplex Industries BV Non-operating holding company 2, 7 Netherlands 100% 100%

Nuplex Industries UK Limited Non-operating holding company 2, 7 UK 100% 100%

Nuplex Operations (Aust) Pty Limited Non-operating holding company 2, 7 Australia 100% 100%

Nuplex Resins (Foshan) Co Limited Manufacture and distribution of synthetic resins 1, 2 China 100% 100%

Nuplex Resins BV Manufacture and distribution of synthetic resins 2, 3, 5, 6, 8 Netherlands 100% 100%

Nuplex Resins Limited Manufacture and distribution of synthetic resins 2, 3 UK 100% 100%

Nuplex Resins LLC Manufacture and distribution of synthetic resins 2, 3 US 100% 100%

Nuplex Resins (Suzhou) Co Limited* Manufacture and distribution of synthetic resins 1, 2, 3 China 100% 100%

Nuplex Resins (Thailand) Limited Non-operating holding company 2, 7 Thailand 100% 100%

Nuplex Sino Chemicals BV Non-operating holding company 2, 7 Netherlands 100% 100%

Plaster Systems Limited Manufacture of pre-mixed lightweight and strengthening plasters

2, 7 100% 100%

PT Nuplex Raung Resins Manufacture and distribution of synthetic resins 1, 2, 3 Indonesia 80% 80%

Silvertown Land Holdings Limited Property holding company 2, 7 UK 100% 100%

Synthese (Malaysia) Sdn bhd Manufacture and distribution of synthetic resins 1, 2, 3 Malaysia 62% 62%

Nuplex Industries (Hong Kong) Limited Non-operating 2, 7 Hong Kong 100% 100%

Quaker Chemical (Australia) Pty Limited

Distributor of specialty products 1, 10 Australia 49% 49%

Innospec Valvemaster Limited* (formerly Octel Valvemaster Limited)

Distributor of specialty products 1, 2 UK 50% 50%

Synthese (Thailand) Co Limited* Manufacture and distribution of synthetic resins 1, 2, 3 Thailand 47.5% 47.5%

PML Holdings Limited Non-operating holding company 2, 7 100% 100%

Polychem Marketing Limited Import and distribution of specialty chemicals 2, 10 100% 100%

Aushold Pty Limited Non-operating holding company 2, 7 Australia 100% 100%

Multichem Pty Limited Import and distribution of specialty chemicals 2, 10 Australia 100% 100%

Nuplex Producao de Resinas Ltda Manufacture and distribution of synthetic resins 2, 4, 9 Brazil 100% 100%

Nuplex US Holdings Limited Non-operating holding company 2, 7 100% 100%

All the above companies have a balance date of 30 June, except companies marked “*” which are 31 December for statutory compliance purposes.

** Nuplex executives acting as directors of the above companies are as follows: 1 Emery S. Severin. 2 Ian Davis. 3 Rob Harmsen. 4 Mike Kelly. 5 Paul Kieffer. 6 Robert Skarvan. 7 James Williams. 8 Pieter Geuze. 9 Norm Stallard. 10 Sam Bastounas. 11 John Prineas.



26. acquisitioN aND Disposal of subsiDiaries aND busiNess assetsGroup Company

(NZD in thousands) 2010 2009 2010 2009

The assets and liabilities acquired are as follows:

Property, plant and equipment 20 – – 661

Agency agreement 3,177 – – –

Inventories 1,114 – – 725

Current receivables 134 – – –

Employee benefits (49) – – (52)

Net identifiable assets and liabilities 4,396 – – 1,334

Cash consideration paid in cash, net of cash acquired 5,317 – – 1,334

Deferred consideration (422) – – –

Goodwill arising on acquisition 499 – – –

Acquisitions in 2010On March 26 2010 Nuplex acquired the business assets of the Australian and New Zealand ingredients business of the Med-Chem group of companies for cash consideration of AUD2.455m and NZD2.237m respectively. Since acquisition the Med-Chem business has generated sales revenue of NZD2.7m and net profits of NZD0.3m. It is estimated that profit for the full year for the acquired business would have been NZD1.2m had the business been owned for the full year.

Acquisitions and disposals in 2009During the year the business assets of Plaster Systems Limited were acquired by the Company in an intercompany transfer at book value.

In December 2008 Nuplex Industries (Aust) Pty Limited sold its Construction EIFS business comprising stock and property, plant and equipment of AUD327,710, for cash proceeds of AUD185,715.

During the prior year the Group paid a further NZD4m related to the acquisition of PML Holdings Limited in November 2005. The amount was conditional on the acquired entity achieving earnings and growth targets to June 2008, all of which were met. This amount had already been fully provided for at 30 June 2008.

27. relateD partiesThe Company has a related party relationship with its subsidiaries and associates (see Note 25) and with its directors and executive officers.

Transactions with subsidiaries and associatesTransactions with subsidiaries and associates are carried out on an arms length basis.

The Group transacts in the normal course of business with its associates on commercial terms. In addition to dividends disclosed in Note 12, the following amounts were received from associates during the year:

2010 2009

Management fees 282 296

Toll manufacturing fees 1,424 1,286

The following transactions are carried out between the Company and its subsidiaries:

2010 2009

Sale of goods and services 3,595 3,162

Purchases of goods and services (5,123) (4,543)

y Dividends received from subsidiaries - refer Note 3 y Interest received and paid - refer Note 7 y Loans to subsidiaries and associates - refer Note 11 y Current receivables - refer Note 11 y Current payables - refer Note 16


27. relateD parties coNtiNued

Transactions with key management personnelIn accordance with the Company’s Constitution, the Company has made provision for a payment upon the cessation of office of one director who has been in office since prior to 1 May 2004.

None of the key management personnel were members of the defined benefit retirement schemes referred to in Note 18.

The key management personnel compensation was as follows:


Directors remuneration 789 732

Executive officers remuneration:

Short term benefits 5,477 3811

Post employment benefits 327 312

Long term incentives 1,288 560

Termination and retirement benefits 3,056 403

PSR’s and Share scheme loan forgiveness accrued – (536)

10,148 4,550

28. recoNciliatioN of tHe Net profit witH tHe Net casH flows from operatiNg activitiesGroup Company

(NZD in thousands) 2010 2009 2010 2009

Profit for the period 66,982 19,071 54,619 (8,623)

Non-cash items:

Depreciation 20,028 21,190 1,322 1,290

Tax 20,478 8,330 (959) (2,004)

Amortisation 2,821 3,376 11 45

Impairment 7,345 – – –

Non current provisions 1,714 (4,258) 970 (404)

Doubtful debts provisions 1,792 5,555 (97) –

Restructuring and remediation provisions 5,667 5,288 569 561

Employee loan provision – 1,444 – –

Intercompany dividends and interest – – (59,327) 2,114

Equity earnings of associate (2,131) 42 – –

Amortisation of capital notes expenses – 72 – 72

57,714 41,039 (57,511) 1,674

Classified as investing/financing:

Loss/(profit) on sale of property, plant and equipment 782 (125) (5) (52)

782 (125) (5) (52)

(Increase)/Decrease in working capital:

Receivables (48,941) 82,134 (3,060) 2,797

Inventories (25,797) 65,194 (360) 2,857

Creditors 62,712 (69,428) 4,806 983

(12,026) 77,900 1,386 6,637

Income tax paid (9,590) (15,392) – (202)

Dividend received from associate 844 738 – –

Cash Flow from Operating Activities 104,706 123,231 (1,511) (566)



28. recoNciliatioN of tHe Net profit witH tHe Net casH flows from operatiNg activities coNtiNued

Reconciliation of statement of financial position working capital movements to operating cash-flow

Receivables Inventories

Creditors and current

provisionsTotal Working

Capital

2010

Balance as at 1 July 256,489 173,668 (227,622) 202,535

Balance as at 30 June 287,113 192,780 (272,957) 206,936

Statement of financial position movement (30,624) (19,112) 45,335 (4,401)

Retranslation of foreign currency balances (16,659) (8,377) 16,463 (8,573)

Business investment/divestment cash-flows 134 1,114 (49) 1,199

Movement in provision for doubtful debts (1,792) – – (1,792)

Movement in provision for obsolete stock – 578 – 578

Movement in provisions – – (5,667) (5,667)

Movement in Hedges – – 6,630 6,630

Working capital cash-flow from operating activities (48,941) (25,797) 62,712 (12,026)

2009

Balance as at 1 July 334,354 234,573 (275,037) 293,890

Balance as at 30 June 256,489 173,668 (227,622) 202,535

Statement of financial position movement 77,865 60,905 (47,415) 91,355

Retranslation of foreign currency balances 10,868 4,721 (10,605) 4,984

Business investment/divestment cash-flows (1,044) – 4,000 2,956

Movement in provision for doubtful debts (5,555) – – (5,555)

Movement in provision for obsolete stock – (432) – (432)

Movement in provisions – – (6,732) (6,732)

Movement in Hedges – – (8,676) (8,676)

Working capital cash-flow from operating activities 82,134 65,194 (69,428) 77,900


five-year statistical summaryfor tHe year eNDeD 30 JuNe 2010

(NZD in thousands) 2010 2009 2008 2007 2006

earNiNgs

Sales 1,459,933 1,493,693 1,532,065 1,451,619 1,300,923

EBITDA (Earnings before Interest, Tax, Depreciation, Abnormals and Amortisation) 139,436 91,530 121,823 104,068 103,435

EBITDA as % of Sales 9.6% 6.1% 8.0% 7.2% 8.0%

Depreciation and amortisation 22,849 24,566 19,951 21,601 24,428

Interest (net) 20,706 31,028 24,467 22,360 19,190

Share of profits of associates (2,131) 42 (997) (1,321) (1,056)

Minority Interests 2,772 2,342 1,742 1,973 1,863

Tax on operating profits 23,796 9,966 23,275 21,791 23,589

Operating profit 71,444 23,586 53,385 37,664 35,421

Unusual items after tax 7,234 6,857 5,081 11,468 (26,552)

Net profit 64,210 16,729 48,304 26,196 61,973

sHareHolDer returNs

Equity 523,330 521,622 365,061 298,755 334,747

Operating profit as % of average equity 13.7% 5.3% 16.1% 11.9% 12.0%

EBITDA as % of average total funds employed 19.5% 12.1% 17.4% 15.8% 16.4%

Shares on issue at 30 June ('000) 192,233 189,798 81,719 79,903 78,425

Dividend per share (cents) 21.0 8.5 43.0 36.0 33.5

Dividend % of operating profit 56% 68% 65% 76% 73%

NZ Imputation per share (cents) 0.0 0.0 2.0 6.0 10.3

Australian imputation 59% 100% 100% 100% 100%

asset backiNg

Total assets 1,004,294 1,046,749 1,099,449 920,774 1,011,052

Tangible assets 844,196 879,715 938,923 787,910 871,590

Net tangible assets (NTA) 363,232 354,588 204,535 165,891 195,285

NTA as % of tangible assets 43.0% 40.3% 21.8% 21.1% 22.4%

NTA per share $1.89 $1.87 $2.50 $2.08 $2.49

Interest bearing debt (net) 72,360 129,194 352,660 319,878 308,680

Debt as % of tangible assets 8.6% 14.7% 37.6% 40.6% 35.4%

Debt as % of total funds employed 11% 17% 46% 50% 46%


sHareHolDer iNformatioNfor tHe year eNDeD 30 JuNe 2010

Directors’ sHareHolDiNgs 2010 2009

Robert M. Aitken – beneficial 77,424 77,424

John W.A. Hirst – beneficial 244,774 220,995

– associated person 12,152

Emery S. Severin – beneficial 120,000 –

David A. Jackson – beneficial 45,000 45,000

Bryan N. Kensington – beneficial 155,112 155,112

– associated person 6,313

Peter M. Springford 19,131 –

Michael R. Wynter – beneficial 18,248 18,248

tweNty largest sHareHolDers as at 2 september 2010Number of

Shares

Percent of Issued

Capital

Accident Compensation Corporation 14,081,708 7.33

HSBC Nominees (New Zealand) Limited A/C State Street 6,738,753 3.51

JP Morgan Nominees Australia Limited 6,689,108 3.48

Masfen Securities Limited 6,569,085 3.42

AMP Investments Strategic Equity Growth Fund 6,227,587 3.24

HSBC Custody Nominees (Australia) Limited 5,949,098 3.10

National Nominees New Zealand Limited 5,945,510 3.09

New Zealand Superannuation Fund Nominees Limited 5,856,475 3.05

National Nominees Limited 4,787,092 2.49

Citibank Nominees (New Zealand) Limited 3,794,097 1.97

NZ Guardian Trust Investment Nominees Limited 3,247,901 1.69

Custodial Services Limited 2,902,450 1.51

Asteron Life Limited 2,493,042 1.30

NZGT Nominees Limited – AIF Equity Fund 2,322,234 1.21

FNZ Custodians Limited 2,249,715 1.17

Custody and Investment Nominees Limited 2,209,601 1.15

HSBC Nominees (New Zealand) Limited 2,129,423 1.11

TEA Custodians Limited 1,889,781 0.98

Investment Custodial Services Limited 1,810,063 0.94

Investment Custodial Services Limited 1,415,743 0.74

Total 89,308,466 46.46


substaNtial security HolDersThe following persons are deemed to be substantial security holders in accordance with section 26 of the Securities Amendment Act 1988 (as recorded in the Company’s Register of Substantial Shareholders):

Number of Shares

Percent of Issued

Capital

AMP Limited 13,764,058 7.16%

Accident Compensation Corporation 13,129,870 6.92%

Orbis Group (holding pre-consolidation June 2009) 42,701,683 6.47%

DistributioN of sHareHolDers aND sHareHolDiNgs as at 2 september 2010

Size of Holding Holders Shares Percentage

1 to 1,000 1,881 909,522 0.47

1,001 to 5,000 4,050 11,225,557 5.84

5,001 to 10,000 2,163 15,811,290 8.23

10,001 to 100,000 2,158 50,281,918 26.16

100,001 to 1,000,000 94 22,548,213 11.73

> 1,000,001 22 91,456,426 47.58

10,377 192,232,926 100.00

There are 209 shareholders holding 7,302 shares, with less than a marketable parcel of shares under the NZX Listing Rules.

There are 413 shareholders holding 38,445 shares, with less than a marketable parcel of shares under the Listing Rules of the Australian Securities Exchange.

classes of sHares aND votiNg rigHtsThe Company has fully paid ordinary shares on issue. At a general meeting every ordinary shareholder present in person or by proxy, attorney or authorised representative has one vote on a show of hands, and on a poll, for every fully paid share held.


statutory iNformatioNfor tHe year eNDeD 30 JuNe 2010

DirectorsThe following Directors held office during the year ended 30 June 2010

Robert M. Aitken Company Chairman; member ex-officio of all Board Sub-Committees;

John W.A. Hirst Managing Director (until 23 Apr 2010); Remuneration Committee (retired from the Company 30 June 2010)

Emery S. Severin Managing Director (from 23 Apr 2010)

Barbara J. Gibson Remuneration Committee, Chair; member of the Safety Health and Environment Committee

David A. Jackson Audit Committee, Chairman

Bryan N. Kensington (until 6 Nov 2009) Audit Committee

Peter M. Springford (from 1 Sep 2009) Safety Health and Environment Committee, Chairman; member of the Audit Committee

Michael R. Wynter Remuneration Committee

In accordance with Regulation 10.6 of the Company’s constitution, Robert M. Aitken and Barbara J. Gibson retire by rotation and, being eligible, offer themselves for re-election.

meetiNgsDuring year ended 30 June 2010 Directors meetings were held and attended by Directors as per the following table:

Board Meetings

Audit Committee

Remuneration Committee

SHE Committee

Robert M. Aitken 15/15 5/5 5/5 2/2

John W.A. Hirst 11/12 - 4/4 -

Emery S. Severin 3/3 - - -

Barbara J. Gibson 15/15 - 5/5 2/2

David A. Jackson 15/15 5/5 - -

Bryan N. Kensington 5/5 2/2 - -

Peter M. Springford 13/13 4/4 - 2/2

Michael R. Wynter 15/15 - 5/5 -

Board meetings were held at the registered office of the company and at subsidiary company premises. The Audit Committee met to discharge its responsibilities as outlined in the Audit Committee Charter. The Remuneration Committee met to review the remuneration packages of senior executives. The SHE Committee was established in May 2010 to assist the Board in discharging its responsibilities in the area of Health, Safety and Environment.

Directors’ remuNeratioNThe following amounts were paid to each director in the form of remuneration and benefits:

Robert M. Aitken $249,618 Fees for the 2010 financial year

Barbara J. Gibson $143,621 Fees for the 2010 financial year

John W.A. Hirst $4,180,495 Total remuneration for the 2010 financial year (AUD)

David A. Jackson $119,500 Fees for the 2010 financial year

Brian N. Kensington $263,274 Fees for the 2010 financial year. (Includes a retirement allowance of $220,682)

Emery S. Severin $415,226 Total remuneration for the 2010 financial year (AUD)

Peter M. Springford $90,667 Fees for the 2010 financial year

Michael R. Wynter $137,350 Fees for the 2010 financial year


sHare DealiNgsThe Board has received the following disclosures of dealings in the Company’s ordinary shares:

Number of Shares Consideration Date

Acquisitions

Peter M. Springford 42 NZD133.14 1-Apr-10

John W.A. Hirst 13,000 NZD 36660 22-Dec-09

5,870 NZD18607.90 1-Apr-10

20,000 NZD65528.60 16-Apr-10

Disposals

John W.A. Hirst 220,995 Perf Rts cancelled Nil 30-Jun-09

(Cancellation of 2007 Senior Management Incentive Scheme) 15,091 Nil 7-Oct-09

Disclosures of iNterest

Robert M. Aitken Director Alesco Corporation Limited

Director Rubicor Group Limited

John W.A. Hirst Director Penrice Soda Holdings Limited

Barbara J. Gibson Chairman Warakirri Asset Management Pty Limited

Director Penrice Soda Holdings Limited

Director St Barbara Limited

David A. Jackson Director Pumpkin Patch Limited

Chairman The New Zealand Refining Company Limited

Director Fonterra Co-Operative Group Limited

Chairman The Dame Malvina Major Foundation

Trustee New Zealand Maritime Museum

Peter M. Springford Chairman Hung Hing Printing Group Ltd

Director The New Zealand Refining Company Limited

Trustee The Graeme Dingle Foundation

Michael R. Wynter Trustee Mitsui Education Foundation

Directors’ iNDemNity iNsuraNceAs permitted by Regulation 13.4 of the Company’s Constitution, directors and employees have been insured against liability for any act or omission in their capacity as directors and employees. Insurance has also been obtained to indemnify directors and employees for costs incurred in defending or settling claims in such liability. The insurance does not cover liabilities arising from criminal actions.

To comply with s162(8) of the Companies Act 1993, directors have certified that the cost of the insurance is fair to the Company.


statutory iNformatioNfor tHe year eNDeD 30 JuNe 2010 coNtiNued

employee remuNeratioNDuring the year the following numbers of current and former employees, not being directors of the company received remuneration of at least NZ$100,000.

NZ Employees

Overseas Employees

100,000 – 110,000 6 97

110,000 – 120,000 13 76

120,000 – 130,000 6 68

130,000 – 140,000 6 55

140,000 – 150,000 6 38

150,000 – 160,000 1 30

160,000 – 170,000 1 30

170,000 – 180,000 1 19

180,000 – 190,000 1 18

190,000 – 200,000 14

200,000 – 210,000 14

210,000 – 220,000 8

220,000 – 230,000 7

230,000 – 240,000 2 10

240,000 – 250,000 2

250,000 – 260,000 3

260,000 – 270,000 1 4

270,000 – 280,000 1 6

280,000 – 290,000 3

290,000 – 300,000 1 1

300,000 – 310,000 3

310,000 – 320,000 2

320,000 – 330,000 4

330,000 – 340,000 1

340,000 – 350,000 2

360,000 – 370,000 1

370,000 – 380,000 2

380,000 – 390,000 1

390,000 – 400,000 1

410,000 – 420,000 1

450,000 – 460,000 1

460,000 – 470,000 1

510,000 – 520,000 1

620,000 – 630,000 1

650,000 – 660,000 1

670,000 – 680,000 1

960,000 – 970,000 1

3,040,000 – 3,050,000 1

corporateDirectory

DirectorsRobert Aitken Chairman

Emery Severin Managing Director and Chief Executive Officer

Barbara Gibson

David Jackson

Peter Springford

Michael Wynter

auDitorsKPMG

solicitorsDLA Phillips Fox

Bell Gully

iNsuraNce brokersMarsh Limited

sHare registrarsComputershare Investor Services Limited Private Bag 92119 Auckland 1142

159 Hurstmere Road Takapuna, North Shore City 0622 New Zealand

baNkersWestpac Banking Corporation Commonwealth Bank of Australia Hong Kong Shanghai Banking Corporation

registereD office12 Industry Road, Penrose Auckland 1061, New Zealand P O Box 12-841, Penrose, Auckland 1642

Phone +64 9 579 2029 Fax +64 9 571 0542 [email protected] www.nuplex.co.nz

corporate office49 – 61 Stephen Road Botany NSW 2019, Australia Locked Bag No.6 Botany 1455, NSW, Australia

Phone +61 2 9666 0331 Fax +61 2 9666 3368

Nuplex executive teamEmery Severin Managing Director and Chief Executive Officer

Sam Bastounas Chief Operating Officer Functional Materials and Specialties

Paul Davey Vice President Human Resources

Ian Davis Chief Financial Officer

Clive Deetlefs Group General Manager Operations

Rob Harmsen Chief Operating Officer Nuplex Resins

Hasan Shafi Vice President Corporate Development and Planning

James Williams General Counsel and Company Secretary

geNeral maNagemeNt Stuart Barry Communication and Business Systems

Judy Gulikers Finance

Paul KiefferEurope | Middle East | Africa

Mike Law Coatings Resins | Australasia

Mike Kelly Americas

Ercilia Barahona Pulp & Paper | Australasia

Paul Schott Composite Resins | Asia Pacific

Bob Skarvan Purchasing

David Evans Construction Products | Australasia

Mark McLean Specialty and Construction Products | Australasia

William Weaver Technology

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www.nuplex.co.nz

Documents

Annual Report 2010 - NZX Research Centrecompanyresearch.nzx.com/reports/nz/2010/NPX2010.pdf · 31 Financial Report The 2010 Annual General Meeting of Nuplex will be held at 10am,