The Motley Fool

Results: Nufarm delivers $420 million EBITDA and announces Nufarm South America sale

The Nufarm Limited (ASX: NUF) share price will be one to watch this morning following the release of the agricultural chemicals company’s full year results.

How did Nufarm perform in FY 2019?

For the 12 months ended July 31, Nufarm reported a 14% lift in revenue to $3,758 million thanks to a combination of acquisitions and growth in all regions except Australia and New Zealand.

Underlying EBITDA came in 9% higher year on year at $420 million, which was in line with its guidance. This was driven by a full year contribution from the European portfolio acquisitions and growth in the North America, Seed Technologies, and Asia business segments.

On the bottom line underlying net profit after tax fell 9%, primarily due to the impact of a full year of depreciation and amortisation relating to the acquired European portfolios.

No dividend has been declared, with management instead intent on deleveraging its balance sheet. Net debt at the end of the period was 9% lower than the prior corresponding period at $1,247 million.

Nufarm managing director and CEO, Greg Hunt, acknowledged that it has been a very difficult year, but appeared confident that the company is well-placed for growth.

He said: “While earnings are up, external headwinds constrained performance. The work we have done in 2019 sets a strong base to continue to improve earnings and cash generation in 2020. We’ve largely addressed the significant inventory overhang from drought conditions in Australia and made good progress in re-setting the cost base to make this a more resilient business while maintaining upside exposure to improved weather conditions.”

“We have completed the integration of the portfolios we acquired in Europe last year and further strengthened our management and commercial teams. There is strong customer demand for the new product portfolio and the actions we have taken to increase control of the supply chain will address product availability issues we experienced in 2019 and contribute to earnings growth in 2020,” he added.

Though, for the first half of FY 2020 management expects EBITDA to be flat on the prior corresponding period. No earnings guidance was provided for the full year.

Nufarm South America sale

As well as announcing its results, management revealed that it has entered into an agreement to sell its South American crop protection and seed treatment operations in Brazil, Argentina, Colombia and Chile to Sumitomo Chemical Company for $1,188 million.

Mr Hunt said: “This Transaction represents compelling value for Nufarm shareholders and will provide an opportunity to refocus on other parts of the business where we can generate higher margins and stronger cash flow.”

“The significant reinvestment we have made in our European, Nuseed and North American businesses in recent years, along with the next phase of transformation in our Australian business, is expected to deliver earnings growth and improved returns for shareholders in the coming years.”

This looks like a good deal for the company, but we’ll see what the market thinks of it later this morning when trading commences.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...