In morning trade the Nufarm Limited (ASX: NUF) share price has crashed 13% lower following the release of its half year results.
Here's how the crop protection and specialist seed company performed in the first half compared to the prior corresponding period:
- Group revenues up 8% to $1.58 billion (up 9.1% in constant currency)
- Underlying EBITDA down 1.9% to $120.9 million.
- Reported net loss after tax of $13.6 million, compared to $12 million profit.
- Underlying net loss after tax of $11.5 million, compared to $10.7 million profit.
- Interim dividend temporarily suspended.
- Net debt rose to $1,577 million from $981 million.
What happened in the first half?
Nufarm reported group revenue growth of 8% to $1.58 billion thanks to strong sales growth in the key markets of North America and Latin America.
The company also reported sales growth in the European and Asian markets, along with stronger revenues from its seed technologies segment. However, the Australian business weighed on its result due to the continuing dry conditions.
It was a similar story with the company's underlying earnings where declines in Europe, Australia/New Zealand and Asia acted as a drag on its performance. Its results also included a first-time impact of amortisation costs relating to the acquisition of the European portfolios last year, ultimately leading to the loss after tax.
In light of this weak result and the sizeable increase in the company's debt due to an increase in net working capital and the debt associated with its European acquisitions, the Nufarm board elected to suspend its interim dividend.
Outlook.
Due to the continued dry weather in Australia, the slow start to the season in Europe in the first half, and the supply issues being experienced with the acquired portfolios, management advised that it expects full year EBITDA to be in the range of $440 million to $470 million.
This is around 12% lower than its previous guidance of underlying EBITDA in the range of $500 million to $530 million.
Should you invest?
It was hard to find many positives in this result and I can't say I'm surprised to see its shares drop lower.
Overall, whilst its shares are cheap and could be a decent option for patient investors, I would prefer to get exposure to this side of the market through either horticulture company Costa Group Holdings Ltd (ASX: CGC) or rural property owner Rural Funds Group (ASX: RFF).
