A 41% rise in net profit and a positive outlook wasn't enough to keep Nufarm Limited (ASX: NUF) in investors' good books this morning.
Shares in the agricultural chemical supplier fell 1.9% to $6.81 even as it reported a close to $8 million increase in underlying net profit to $26.5 million on the back of a 4% lift in revenue to $1.2 billion for the six months to end January.
Management even threw in a 1 cent lift in interim dividend to 4 cents and said that it is expecting a stronger second half thanks to more favorable weather patterns ahead of the biggest crop planting season for the year.
There is a strong earnings skew to the second half due to seasonality factors, and the market is expecting full year sales to hit $2.77 billion and net profit to come in at a little over $100 million.
But the profit taking isn't surprising given that the stock has been one of the best performers in the S&P/ASX 200 Index (INDEXASX: XJO, ^XJO) over the past year, with a stunning 69.5% surge to hit a five-year high of $7.50 at the start of this month.
Further, the stock is trading on a relatively full price-earnings (P/E) multiple of just over 17x, based on 2014-15 consensus estimates.
The strong rise in profit was driven in part by a 26% lift in sales of crop protection products in the United States, which accounts for 20% of total crop protection sales, and a stronger result from Asia.
Nufarm's result stands in contrast to the disappointing downgrade from Graincorp Ltd (ASX: GNC) with the latter warning shareholders last month to expect 2015 to be one of the toughest on record.
Investing in an agri-business is not for the faint hearted as it is at the mercy of unpredictable weather and can be impacted by geopolitical events, such as sanctions and tariffs.
However, Nufarm's business is one of the more defensive businesses in this sector and I suspect many would be using any price correction as a buying opportunity.
Nonetheless, for those looking for another growth stock idea that isn't buffeted by the whims and fancies of the weather should sign up below to see what our top stock for 2015 is.
