Hot weather squeezes Nufarm, but the forecast looks sunny
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.
Frequently Asked Questions about this Article…
A long, hot summer and dry climatic conditions in Australia hit demand for Nufarm’s herbicides and fungicides, squeezing margins and pushing the company’s preferred underlying net profit down. Management said the weak domestic demand was a key factor, and it expects a return to more normal seasonal conditions to help improve results next year.
Nufarm reported a net profit of $81.7 million, up from $72.8 million a year earlier. Revenue rose to $2.3 billion from $2.2 billion, and earnings per share increased to 25.4 cents from 22.3 cents.
The underlying net profit—the company’s preferred comparison—fell to $83 million from $115 million because of 'exceptionally weak demand' in Australia due to dry weather and a squeeze on margins, even though overall net profit and revenue were higher.
Earnings came in at the bottom end of the company’s earlier guidance, and the shares fell about 2 cents on the day to close at $4.86 (after an intraday low of $4.81). Confidence was partially maintained by management’s forecast of a return to normal seasonal conditions and plans to diversify into higher‑value product and market segments.
Nufarm flagged further growth in the year ahead, expecting seasonal conditions to normalise and boost pre‑tax profit. The company is also focused on diversifying into higher‑value and more defendable product and market segments and plans further investment in promising markets.
Earnings grew in all markets outside Australia, with sales in Brazil rising by more than 40% in local currency terms. Nufarm reported record sales levels in Brazil in August and September and said it would pursue further growth prospects and investment there.
Europe faces a drag from forced product withdrawals that Nufarm estimates will reduce that division’s pre‑tax profit by about $4 million. Domestically, Australia remains a focus after weak demand and management is reviewing its business and distribution arrangements.
Yes — the final dividend was increased to 5 cents per share from 3 cents per share. For investors, that represents a higher cash return for the year, though future dividends will depend on how conditions and the business review play out.
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