Hot weather squeezes Nufarm, but the forecast looks sunny
A long hot summer and heightened domestic competition weighed on the performance of herbicides and fungicides group Nufarm in the year to July, as it flags further growth in the year ahead with an anticipated return to more normal weather conditions.
In the year to the end of July Nufarm posted a net profit of $81.7million, up from $72.8 million a year earlier with the earlier profit hurt by one-off material items.
Revenue rose to $2.3 billion from $2.2 billion with earnings a share rising to 25.4¢ from 22.3¢.
The final dividend has been raised to 5¢ from 3¢ a share.
Earnings came in at the bottom end of the guidance issued earlier by the company, which resulted in shares dropping 2¢ on Wednesday to close at $4.86, off the day's low of $4.81. Helping retain confidence in the shares was the forecast of a return to more normal seasonal conditions in its major markets, which will help to lift the pre-tax profit in the year ahead. Efforts to further diversify and enter new markets while moving into "higher value and more defendable product and market segments" is also expected to boost gains.
The underlying net profit, the company's preferred level of comparison, slid to $83 million from $115 million due to "exceptionally weak demand" in Australia amid dry climactic conditions along with a squeeze on margins.
However, earnings grew in all other markets, with sales in Brazil rising by more than 40 per cent in local currency terms, it said. Nufarm said it would pursue further growth prospects there as it flagged further investment.
The buoyant performance in Brazil looks set to continue, with record sales levels recorded in August and September, it said.
A drag on earnings in the year ahead will be Europe, where forced product withdrawals will slice an estimated $4 million off the pre-tax profit of this division.
However, as its largest single market, Australia is the focus of much of management's attention where "an extensive review of the business has been undertaken".
The change to the domestic distribution arrangements with the launch of its own product in the key glyphosate market is the main area of interest.
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