The Nufarm Ltd (ASX: NUF) share price is under pressure on Thursday morning after a market selloff offset the release of a strong half-year result.
At the time of writing, the agricultural chemicals company's shares are down 3% to $6.43.
Nufarm share price down following half-year update
- Revenue up 31% to $2,165.5 million
- Underlying EBITDA up 41% to $330 million
- Net profit after tax up 61% to $98.7 million
- Interim fully franked dividend of 4 cents per share
What happened during the half?
For the six months ended 31 March, Nufarm delivered a 31% increase in revenue to $2,165.5 million and a 41% lift in underlying EBITDA to $330 million. The latter was in the middle of its guidance range of $320 million to $340 million.
Management advised that this strong result reflects healthy seasonal demand for its crop protection and seed products, higher grain prices, and the success of its transformation program.
Nufarm's Managing Director and CEO, Greg Hunt, commented:
This is a very strong result for Nufarm, validating our strategy and reflecting good management through volatile global conditions. While we have benefited from healthy seasonal demand in our markets and higher grain prices, we are also reaping the outcomes of the hard work undertaken in recent years to transform the company.
Our focus on core crops and key geographies is delivering strong results. Our seed technologies platforms continue to hit strategic milestones and provide significant growth opportunities for the company.
How does it compare to expectations?
Despite what the Nufarm share price performance might indicate, analysts at Goldman Sachs were blown away by the result.
They commented: "NUF reported 1H results significantly above expectations (EBITDA +46% above GSe), with strong underlying conditions amplified by demand pull-forward across the Australia and European segments."
However, due to the broker's belief that this has been driven largely by demand pull-forward, it has only made a modest revision to its full-year estimates.
The broker said: "These benefits should drive a larger than normal 1H EBITDA skew (we model 62%/38% 1H/2H), leading to a more modest +5% revision to our full-year EBITDA forecasts vs the large 1H beat."
Goldman currently has a buy rating and $6.00 price target on Nufarm's shares.
Outlook
Management has spoken positively about the second half. Mr Hunt commented:
The outlook for the full year remains positive. Current industry conditions are highly favourable with grain prices likely to remain elevated driving increased planting and demand for crop protection products. Full year results are anticipated to be proportionately more weighted to the first half compared to FY21, given the elevated forward sales due to global uncertainty and volatility in relation to active ingredient pricing, global supply chain and logistics challenges.
Looking further ahead, the CEO sees a path to annual revenues of $4 billion by 2026. He explained:
Our five-year growth aspirations remain unchanged as per the detailed strategy presentation in February. We see a credible path to over $4 billion revenue by 2026, with our seed technologies business aspiring to revenues of between $600-$700 million in 2026.
