The Nufarm Limited (ASX: NUF) share price is soaring higher this morning after the company released its half-year results for FY 2020. At the time of writing, Nufarm shares are up by 13.03% to $4.77 while the S&P/ASX 200 Index (ASX: XJO) is pushing 5.80% higher.
Drop in revenues and earnings for H1 FY 2020
The crop protection and specialist seeds company noted that the challenging market conditions it had reported during the 2019 financial year have continued into the first half of 2020.
This is very much reflected in Nufarm's top-line financial results, with the company recording a loss of $122 million compared to a loss of $14 million during the prior corresponding period (pcp) of 1H19. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) also fell sharply by 45% to $66 million.
Revenues were also down, with Nufarm reporting an overall revenue decline of 6% to $1,477 million.
Additionally, the company has continued to suspend its interim dividend.
Strengthened cash position
On a positive note, Nufarm noted that it has made solid progress with regards to the priorities that it had set for the current financial year. This includes improving its overall safety performance while maintaining its previous level of gross margins as well as improving its cash flow management. Nufarm noted that its free cash flow has increased by $170 million over the pcp.
The company also pointed out that its balance sheet is now set to strengthen following the sale of its South American businesses which is scheduled to be completed on 1 April 2020.
Overall, I think the company has made reasonable progress in the light of challenging market conditions.
With regards to outlook for the remainder of the financial year, Nufarm did note that the uncertainty around the outbreak of the coronavirus is likely to weigh on its second-half results to some extent. However, the company stated that there has been stronger demand for its products and services following the recent improvement in overall weather conditions.
Recent investments positioned for solid medium-term growth
Nufarm noted that it has made substantial investments in the last few years in its European, Nuseed and North American businesses. The company anticipates rising profits from this portfolio of investments over the medium term. Nufarm is confident that these improvements could lead to improved shareholder returns over the years ahead.
In addition, it expects to see continued improvement in its Australian-based businesses, which has been recently impacted by bushfires and drought.
The share price performance of Nufarm has not been particularly strong recently, tracking sideways for the past 12 months. However, the Nufarm share price has fared better than most companies since the sharp market correction began on February 20, only dropping around 20%. I think this is mainly due to the essential role that food and crops play in the coronavirus crisis.
