Nufarm reports decline in interim earnings

Company News

by Glenn Dyer

A four-cent unfranked dividend for shareholders in the ag chemicals business Nufarm (ASX:NUF), and the promise of a pickup in the current second half as it expects an upturn in its crop protection business.

But that second-half pickup will still leave Nufarm’s earnings well short of 2022-23’s level.

The company told the market on Thursday that interim revenue fell 10% to $1.758 billion, leaving statutory net profit down 67% at just $49 million.

Directors said the company earned an underlying EBITDA of $217 million, down 31% from a year earlier as margins were squeezed.

The interim dividend is down 20% from last year’s 5 cents a share.

Investors didn’t like the report, and Nufarm shares lost more than 9% in the first 15 minutes of trading Thursday morning.

Directors said that while revenue and margin in the company’s Crop Protection business were impacted by challenging industry-wide conditions, we delivered a solid result and achieved a number of important strategic milestones in the half.

The company said it is looking for a better performance this half and EBITDA for the full year of $350 million to $390 million.

CEO Greg Hunt said the midpoint of this guidance implies growth of 25% YoY in EBITDA in the second half of FY24.

But he also noted that the midpoint also suggests "a reduction of 16% from FY23 and 17% from the record underlying EBITDA reported in FY22."

"Whilst we are never satisfied with a decline in earnings, that would be a very solid outcome in the context of the conditions that have been faced by the industry," he added.

The company said it finished the period with net debt of $1.2 billion and net leverage of 3.6 times underlying EBITDA. "Leverage was above our target range of 1.5 to 2.0 times underlying EBITDA due to the combined effects of seasonal working capital, lower earnings in 1H24 than in the pcp, and 2H23 representing a lower proportion of full-year earnings than normally expected."

"During the first half, we made significant progress in reducing inventory. As of 31 March 2024, inventory was 20% lower than 31 March 2023.

"During the first half of the fiscal year, we normally experience a cash outflow due to the seasonal build of working capital. The group’s total net operating and investing cash flow for 1H24 was a cash outflow of $317 million. This outflow was considerably lower than the $663 million outflow experienced in 1H23 and resulted from a lower working capital build during the current period," the company said on Thursday.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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