Nufarm share price charges higher on FY 2020 guidance

The Nufarm Limited (ASX:NUF) share price is on the move today after announcing impairment charges and its earnings guidance for FY 2020…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Nufarm Limited (ASX: NUF) share price is charging higher in morning trade.

At the time of writing the agricultural chemical company's shares are up 4% to $4.07.

What did Nufarm announce?

This morning Nufarm announced a non-cash asset impairment and revealed its unaudited FY 2020 earnings estimate.

According to the release, the company expects to recognise non-cash, impairment charges in relation to its European assets of approximately $215 million in FY 2020.

This comprises a pre-tax impairment of intangible assets of approximately $190 million and a derecognition of tax assets of approximately $25 million.

Management advised that the assessment of the carrying value takes into account recent operating performance and a moderated outlook of future earnings. The latter is based on an expectation of continuing margin pressure in its base product portfolio due to higher manufacturing costs and increased competition.

And while there are early indications that raw material costs for products in the portfolios Nufarm acquired in 2018 are easing, it notes that input costs for a small number of products are expected to remain elevated in the medium term. This has also been reflected in the carrying value assessment.

While this is disappointing, Nufarm's CEO, Greg Hunt, appears confident it is onwards and upwards from here for the European business.

He commented: "We believe the European business has reached an earnings trough in FY20, however it is appropriate to take this step to revise the carrying value of the assets. We have a comprehensive improvement program underway in Europe to grow revenues, reduce our cost to serve and lift margins."

"We expect this program, combined with an anticipated easing in raw material costs and improved weather conditions would be the major drivers of improved profitability in the European business in FY21," he concluded.

FY 2020 earnings estimates.

Based on its preliminary and unaudited accounts, Nufarm expects underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $290 million to $300 million in FY 2020.

Though, following the sale of the South American businesses, underlying EBITDA from continuing operations is expected to be in the range of $230 million to $240 million. This compares to EBITDA of $420 million in FY 2019.

Mr Hunt commented: "We have delivered positive momentum across most regions in the second half of the financial year, however earnings for the full year will be down on last year, primarily due to the divestment of the South American businesses, lower earnings in the first half and reduced earnings in Europe."

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.

More on Share Gainers

A female superhero dressed in shiny green with a mask leaps in the sky with leg and arm outstretched in a leaping action.
Share Gainers

WiseTech shares rocket 11% higher today: Buy, sell or hold?

It looks like we could see a lot more out of WiseTech shares over the next few months!

Read more »

Ecstatic man giving a fist pump in an office hallway.
Share Gainers

Why AMP, Life360, Netwealth, and Ora Banda shares are racing higher today

These shares are having a strong session. What's going on?

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Evolution Mining, Mesoblast, Nufarm, and Virgin Australia shares are storming higher today

These shares are having a good session on hump day. But why?

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face.
Share Gainers

3 ASX 200 shares tipped to climb another 35%

These shares have helped push the ASX 200 Index higher.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Boss Energy, Macquarie, Nova Minerals, and WiseTech shares are storming higher today

These shares are climbing more than most on Tuesday. What's going on?

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Share Gainers

Guess which ASX mining stock is rocketing 80% today on huge Philippines news

This small-cap ASX mining stock is coming close to doubling its value today.

Read more »

Excited couple celebrating success while looking at smartphone.
Share Gainers

Why Monash IVF, Pro Medicus, Telix, and Woodside shares are storming higher today

These shares are starting the week in a positive fashion. But why?

Read more »

Man in a business suit leaps off a boulder in front of a blue sky.
Share Gainers

3 ASX 200 stocks surging 13% to 36% in this shortened trading week

Investors sent these three ASX 200 stocks flying higher following the Easter break. But why?

Read more »