Nufarm (ASX:NUF) share price falls despite stellar profit growth

Nufarm had a very strong year…

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The Nufarm Ltd (ASX: NUF) share price is on the move on Wednesday following the release of its full year results.

At the time of writing, the crop protection and specialist seeds company’s shares are down 5% to $4.75.

Nufarm share price falls despite strong profit growth

  • Revenue increased 10% to $3.2 billion
  • Underlying EBITDA jumped 51% to $370 million
  • Underlying net profit after tax of $61 million (compared to $73 million loss in FY 2020)
  • First dividend since 2018 declared at 4 cents per share
  • Outlook: Positive momentum should continue in FY 2022

What happened in FY 2021?

Nufarm well and truly returned to form in FY 2021, reporting a 10% increase in revenue to $3.2 billion and an underlying net profit after tax of $61 million. The latter compares very favourably to a pro forma loss of $73 million a year earlier.

Management advised that this was driven by revenue and underlying EBITDA growth in all regions as well as its seed technologies business.

This was particularly the case in Europe, where Nufarm delivered an 80% increase in underlying EBITDA to 108 million euros. This reflects positive trading conditions and operational performance improvements through its Performance Improvement Program (PIP). Management notes that the successful execution of the PIP initiatives across the company resulted in a $20 million improvement to earnings for this financial year alone.

Nufarm’s APAC segment was also a very positive performer. It delivered a 47% increase in underlying EBITDA to $112 million. This was supported by a 57% lift in Seeds underlying EBITDA to $46 million and a 25% increase in North American underlying EBITDA to US$79 million.

Management commentary

Nufarm’s Managing Director and CEO, Greg Hunt, commented: “2021 has been a successful year for Nufarm. We delivered solid financial results and continued to take actions that will positively shape the future of our company. Our much-improved financial performance was driven by revenue and underlying EBITDA growth in all regions as well as our seed technologies business.”

“This year’s results have benefited from both management initiatives that drove earnings growth, as well as favourable agricultural conditions. Early indications from the first six weeks of FY22 are that this positive momentum should continue. The outlook for soft commodity prices remains positive and improved seasonal conditions in key grain producing regions is resulting in continued demand for seeds and crop protection products,” he added.

Outlook

While no guidance was given for the year ahead, as mentioned above, FY 2022 has started strongly and management appears optimistic the positive momentum will continue.

Though, the company does acknowledge that supply chain challenges and raw material costs could put pressure on margins.

Mr Hunt commented: “We continue to monitor ongoing industry-wide supply chain and logistical issues. Increasing cost of raw materials as well as global logistics and supply chain challenges, will continue to pressure margins, however we expect price increases and volume growth will provide an offset. Our geographic and product diversification helps mitigate any potential impacts from these disruptions, or changes in seasonal conditions.”

Outside this, Nufarm advised that it will continue to focus on driving its long term growth plans.

Mr Hunt concluded: “Our core objective for FY22 is to continue to drive our long-term growth plans whilst at the same time focusing on optimising trading, improving margins and lifting cash generation. This underpins the strength of the business and enables us to pursue additional growth opportunities.”

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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