Nufarm's underlying profit up 18 percent, near top end of guidance

Monday 24th September 2012

Agricultural chemicals company Nufarm's underlying annual net profit rose 18 percent to the top end of guidance as its business got back on track after several poor years, assisted by a strong performance by its seeds operations.

Nufarm's bottom-line net profit returned to positive territory, with A$72.6 million in the 12 months ended July 31, compared with a net loss of A$49.9 million the previous year and net loss of A$22.7 million in 2010.

A major factor in the bottom-line turn-around was one-off costs dropping to A$61 million from A$143.7 million. This year's costs included restructuring, debt refinancing and litigation costs with the largest being its previously reported A$43.5 million settlement with disgruntled investors.

Managing director Doug Rathbone said the company is "well-positioned to generate an improved underlying earnings result in the 2013 financial year" if seasonal conditions prove to be at least average.

Underlying net profit rose to A$115.4 million from A$98.3 million compared with the company's prediction it would come in between A$110 million and A$116 million.

"The underlying result represents strong growth on the previous year and further progress in respect of the company's strategic growth plan," Rathbone said.

Nufarm performed solidly against a backdrop of mixed seasonal and market conditions in the various geographies in which it operates, he said.

"Australia experienced average seasonal conditions, market conditions in Brazil were mostly positive although areas of the country were impacted by drought, while the US - after a good start to the season - was impacted by severe drought."

Most European markets experienced "challenging climatic conditions" and suffered from elevated credit and economic risks.

Nufarm's crop protection business, accounting for 94 percent of total sales, increased sales three percent to A$2.06 billion while average gross margin was steady at 27 percent. Its seed technologies business' sales jumped 39 percent to A$121 million with average gross margin improving slightly to 53 percent from 52 percent the previous year.

Nufarm will pay a fully-franked final dividend of 3 Australian cents a share taking the year's payout to 6 cents compared to no dividends last year. The results announcement was brought forward from the previously planned Sept. 27 release date.

Nufarm shares closed at A$5.85 on the ASX on Friday, down from their high earlier this month at A$6.31 but well up from A$3.96 in October last year.

Nufarm's NZX-listed perpetual, subordinated, unsecured, redeemable exchangeable notes are up $1.40 per $100 face value at $103.40. The notes have trended higher from $96 per $100 face value on July 26 since Nufarm issued it last profit guidance that day.

BusinessDesk.co.nz

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