Three pretty upbeat stories from companies reporting to the market on Wednesday, with Nufarm
(ASX:NUF), Graincorp
(ASX:GNC) and the erstwhile Kathmandu
(ASX:KMD) all in good shape.
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Shares in rural chemicals group Nufarm (ASX: NUF) leapt more than 10% at one stage on Wednesday as investors grabbed at what was a solid result to take the shares to levels not seen since mid-April.
Like Elders, Incitec Pivot and GrainCorp, the year to September 30 saw Nufarm enjoy a second year of good conditions across much of rural Australia, even if rain and floods associated with La Nina continue to dog some of its customers in NSW, Victoria and earlier in the year, Queensland.
As a result of the strong result shareholders will be rewarded with a 150% increase in annual dividend to 10 cents a share with a 6 cents per share final.
The four cents a share paid earlier this year was the first interim return for shareholders since May, 2018 as the drought tightened its grip on much of the country.
The shares ended the session up 8.8% at $5.90.
Nufarm also revealed a 24% increase in underlying earnings before interest tax depreciation and amortisation EBITDA, a 17% rise in revenue, and a 65% increase in net after tax profit.
Revenue grew to $3.8 billion relative while operating profit increased by 33 per cent to $208 million.
Excluding non-operating corporate revenue (representing sales to Sumitomo Chemical Company Ltd under supply agreements following the Latin American operations divestment), revenue grew 19% to $3.6 billion.
Gross profit for the year was $973 million, which included material items of $16 million.
Excluding the impacts of the material items and non-operating corporate revenue, underlying gross profit margin was stable at 28%, directors said.
Underlying EBITDA of $447 million rose 24% with increased revenue and higher gross profit impacted by an increase in costs.
Underlying selling, general and administration costs (underlying SG&A) increased by $56 million as compared to the prior comparative period across a number of expense categories. That however was less than the $86 million in EBITDA for the full year.
Net profit after tax jumped 65% to $107 million.
Nufarm’s Asia Pacific business segment posted a 21% increase in underlying EBITDA, to $135 million despite battling supply chain challenges, as did many other businesses.
Its North America business did better, lifting underlying EBITDA 42% to $148 million amid higher sale prices and strong demand for crop protection products.
In Europe, Nufarm’s business reported a steady underlying EBITDA at $171 million as sales improved and regulatory headwinds took their toll – and the drought and situation in Ukraine and Russia hit rural activity.
Finally, the company’s Seed Technologies business saw its underlying EBITDA lift 26% to $59 million, driven by demand for Nuseed’s hybrid canola varieties, sorghum, and sunflower.
Looking to the new financial year, Nufarm CEO, Greg Hunt was circumspect, saying that “assuming normal seasonal conditions”, the company expects to post modest underlying EBITDA growth this fiscal year. So far, conditions have remained favourable.
And looking further ahead, Hunt said the company is on track to grow its revenue to more than $4.6 billion from 2021-22’s $3.6 billion.
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GrainCorp‘s (ASX: GNC) result has been a long time coming, with the company having boosted guidance several times this year as the grain harvests and plantings for the new crop year hit forecasts or survived the rounds of heavy rain and flooding along the East Coast of Australia.
GrainCorp had been predicting record revenues and earnings in 2021-22 for months now as it has handled two of the biggest wheat harvests on record on the East Coast and especially in NSW as well as large crops of oil seeds.
La Niña and the continuing wet weather and floods have had an impact in 2021-22 but not excessively so, unlike the latest round which is continuing.
This time, as the company indicated yesterday, there have been problems in parts of NSW badly hit by the 4th and 5th floods in some grain growing areas of the state.
The big wet and floods has made the outlook uncertain.
“East Coast Australia (ECA) conditions have been favourable leading into the 2022/23 winter harvest, with ABARES (The Federal government rural forecaster) “currently forecasting another well above-average crop,” GrainCorp CEO Robert Spurway said in Wednesday’s profit report.
“Recent heavy rainfall across large parts of ECA has delayed the harvest by several weeks and continues to present challenges for growers, their communities and local businesses.
“We are working closely with growers to support them in light of the logistical challenges presented by the weather events, and to help maximise the value of their harvest.
“While flooding will impact both yield and quality in parts of ECA, we have a high level of grain inventory in our network, and we expect a large export program to continue throughout FY23.
“The exceptional margins achieved in the first half of FY22 moderated in the second half as expected, as supply from the northern hemisphere improved. Pleasingly, domestic and global demand for feed and milling grades remains strong,” the CEO told the ASX.
“Oilseed crush margins are expected to remain favourable, and we are well positioned to continue operating our crushing facilities at high utilisation.
“Overall, GrainCorp is well positioned for the new financial year, with our businesses performing well, a strong balance sheet and pipeline of growth opportunities,” Mr Spurway added.
“We operated our ports at close to full capacity in FY22, exporting 9.2 million tonnes of grain and oilseeds to international markets,” Mr Spurway said.
GrainCorp’s International businesses also performed well, with good export margins from Western Australia.
GrainCorp’s Fats and Oils businesses performed strongly amidst high global demand for renewable fuel feedstocks, including used cooking oil (UCO).
The market wasn’t surprised by the results because GrainCorp has been assiduous in updating guidance in the past few months so it was not unexpected that some investors would take profits which saw the shares dip 2% to $7.83.
Earnings before interest tax depreciation and amortisation (EBITDA) more than doubled to 703 million from 2021’s $331 million which saw net profit after tax surge to $380 million from $139 million (which indicates good margin gains).
The improvement in margins is underlined by the way a 43% jump in revenue for the year to $7.8 billion became a doubling in EBITDA and then a near trebling in net profit after tax. That performance is going to be hard to top in 2022-23.
CEO Spurway said in commentary the 2021-22 result “reflects the quality of our businesses and infrastructure assets, our operational performance, and the capability of our teams.
“Each of our business segments recorded an increase in activity and volumes, with more grain handled and exported, higher oilseed crush volumes and stronger foods sales.
“Our teams worked hard to navigate supply chain challenges and continue delivering for our customers, while effectively managing costs and broader inflationary pressures.
“Disruptions to global supply chains were driven by weather events, the ongoing impacts of COVID-19 and the conflict in Ukraine.
Total dividend for the year was trebled to 54 cents a share from 18 cents a share the year before with the payments of a two-part final of 30 cents a share – 14 cents a share ordinary and 16 cents a share special. Both are fully franked
The 54 cents per share is in addition to the $50 million buyback first announced by GrainCorp in November 2021 and was completed in July of this year.
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It’s amazing what a year, vaccinations and no Covid lockdowns does to a retailer’s sales and confidence – just ask the one-time nee Kathmandu, KMD Brands (ASX: KMD).
A string of major chains – with the exception of Coles and Woolies supermarkets (but not Woolies’ Big W department store chain) have reported solid sales for the post June 30 period – extending into October.
A year ago, the same period was depressed by lockdowns and falls in sales and earnings but 12 months on, in the case of KMD, saw “strong sales and profit growth in Q1 FY23”.
Total group sales jumped 61.8% (because of the lockdowns in Australia and NZ a year ago) “reflecting the removal of Australasian lockdowns and a return to more normal trading.”
KMD said that had seen its first quarter operating profit improve “by nearly $30m year-on-year.”
Bricks and mortar sales improved at the expense of online with the company see a more than doubling in ‘direct to consumer sales’ through Kathmandu outlets (107%) and a 29.2% jump at Rip Curl.
“Oboz achieved record Q1 wholesale and online sales, with supply no longer a constraint. The forward order book and inventory position support ongoing growth,” LMD said.
And the company said group gross margin remains resilient, “with improved margin for the Kathmandu brand.”
CEO Michael Daly said in the statement on Wednesday:
“KMD Brands achieved a positive result in Q1 FY23, with strong sales growth across all brands compared to both prior year and pre-COVID levels.
“Pleasingly, gross margin and profitability are holding up well, with group underlying operating profit for the first quarter of FY23 improving by nearly $30 million year-on-year.
“Looking forward, while current trading for our three brands is strong, we remain cautiously optimistic, with the potential of high inflation and rising interest rates impacting consumer sentiment in our key global markets. As always, the first half year results remain dependent on the key Black Friday and Christmas retail trading periods still to come.”
Investors liked that news and the shares rose more than 4% to $1.
