In the Sunday Age...About to tank? Not this outfitMarch 11,...

In the Sunday Age...

About to tank? Not this outfit
March 11, 2007

The drought has been a godsend for Nylex, whose fortunes are turning around on the back of water-saving devices. Christopher Webb reports.

WHILE water restrictions are affecting millions of Australians, the drought could not have come at a better time for Nylex.

Last year it was touch and go for the company, whose products include water tanks, water saving devices, fuel tanks, automotive carpets and consumer brands such as Esky, Gardena and Nylex itself.

But the drought and general awareness of the need to save water is underpinning a recovery at a business that in recent years has lost $586 million. Nylex's four water tank factories ¡ª in Pakenham, Sydney, Brisbane and Bundaberg ¡ª are working overtime. You want a water tank? You'll wait three or four months for delivery.

And it isn't only tanks that are injecting some much needed optimism into the Nylex camp. Grey water flexi-hoses in crates positioned near the cash registers of your hardware store are also walking out the door, and those sorts of products also spell good news for Nylex.

Peter George, the company's executive chairman who has been running the show for the last year, is not getting carried away, because there is more to Nylex than just water tanks and water saving products.

But he says the company was due for some luck. "The water business is going very well. I'm expecting somewhere in the order of a more than doubling of sales and a $10 million turnaround in profitability," he says, referring to the water tank division.

"Our water tank factories are operating 24 hours a day, and there's only so many tanks that can be rota-moulded. It's the low-tech end of the plastics manufacturing industry and it takes a couple of hours to manufacture each tank.

"The hoses and irrigation products and grey water diverters are sold through our consumer division, and they're performing very well, too.

"That's clearly the area of excitement around Nylex and there are a number of other initiatives that will be unfolding in the near future.

"We've got an evaporation minimisation technology involving floating modules that we're testing with Rio Tinto at the moment.

"They're like a giant Frisbee and they sit on dams, and prevent evaporation without spoiling the quality of the water.

"We're also investigating a number of grey water technologies. We think that once the pricing of water goes somewhere near its true market value, which it must do, then some of these things will also start to walk out the door."

He says the water story has been of immense importance for Nylex. "The way I look at is that in 2006 everything went against Nylex largely on the back of fuel prices, which drove up raw materials prices and drove down vehicle production numbers and drove up the cost of distribution.

"This year Nylex has a few things going for it; the water situation, plus fuel prices coming down. Luck's a fortune, as they say. A little bit of luck goes a long way because that's the thing that can help turn the whole momentum of the company around.

"The cultural stuff of being in a siege mentality can be lifted because you suddenly have something to be excited about."

Less than one year ago, Mr George would probably have hesitated about declaring that Nylex would make it. In the meantime, it has raised $40 million from investors, including Kerry Stokes.

Now he says, "Nylex will survive, and now that we've got over that hump, the next phase of the journey is to decide what Nylex is going to be when it grows up.

"This is a three-year job and we're one year into it. I think we've certainly stabilised the patient and now we have to take steps to grow the businesses that have potential, and reduce our exposure to the ones that don't."

Nylex's latest results for the December half-year showed an $18 million turnaround in underlying operating performance that saw a $4.6 million profit before interest, tax and one-off items.

The overall result was a $1.4 million loss, up from $1.1 million, but Mr George says that was a "bit of an apples-and-oranges comparison" due to the timing of various write-downs. He expects "substantially improved" earnings for the current year.

Water ways

¡ö Water used annually
18,767 gigalitres

(1 GL = 1000 million litres)

¡ö Who used it?Agriculture 65%Water supply industry 11%Households 11%Manufacturing 3%Mining 2%Electricity and gas 1%down 8 % in 3 years

¡öHousehold consumption

¡öPer person consumptiondown 14 % in 3 years

¡öHouseholds usingup 45% in 3 years

recycled water

¡öVolume of reused waterup 10 times in 3 years

used by households

¡ö Use by stateNSW 32%Vic 27%Qld 23%WA 8%SA 7%Tas 2%NT 0.8%ACT 0.3%WA 180 KLNT 153 KLTas 143 KLQld 124 KLACT 95 KLSA 94 KLNSW 84 KLVic 81 KL(1 KL = 100 litres)

¡öPer person annually

SOURCE: Australian Bureau of Statistics, Water Account, Nov 2006. Figures are for 2004-2005 and comparisons are against the previous water account in 2000-2001.