Nufarm share price tumbles despite huge first-half profit growth

Nufarm has delivered a strong half-year result…

| More on:
Dollar sign made from grass growing from ground as one person drips water on it and another holds coin

Image source: Getty Images

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

Key points

  • Nufarm has delivered strong profit growth during the first half
  • This was driven by strong demand, higher grain prices, and the benefits of its transformation program
  • Goldman Sachs was impressed and has bumped its full-year earnings estimates higher

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.

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 Scott Phillips.

More on Earnings Results

chicken, KFC, drumstick, fried food, junk food
Earnings Results

Collins Foods share price jumps 11% on FY22 results

This KFC restaurant operator had a strong year...

Read more »

Happy woman looking for groceries. as she watches the Coles share price and Woolworths share price on her phone
Consumer Staples & Discretionary Shares

Metcash share price storms 8% higher on FY 2022 earnings beat

Metcash had a strong 12 months...

Read more »

A young man with short black fuzzy hair and wearing a black and white striped t-shirt looks surprised at a broker's tip that Macquarie shares will rise by 30%
Earnings Results

Mesoblast share price spikes amid ‘substantial reduction in operational spend’

Mesoblast also completed the resubmission of its Biologics License Application (BLA) for remestemcel-L to the FDA last quarter.

Read more »

A doctor sits with a patient and uses a pen to point to certain parts of her mammogram scan
Earnings Results

Volpara share price up on record full-year results

ASX investors appear to be pleased with Volpara's results.

Read more »

Miner looking at his notes.
Earnings Results

Champion Iron share price falls on FY22 results

Champion Iron shares are under pressure on Thursday...

Read more »

Person with thumbs down and a red sad face poster covering the face.
Earnings Results

Here’s why the New Hope share price is tumbling 8% on Thursday

Coal prices have reached all-time highs amid Russia's war in Ukraine.

Read more »

a man sits at a bar leaning sadly on his basketball wearing a US flag sticker on his cheekbone near a half drunk beer and looking despondent as though his basketball team has just lost a game.
Earnings Results

Why is the Catapult share price tumbling 6% lower today?

Catapult shares are falling on Thursday following the release of its full-year results...

Read more »

Man with a sleep apnea mask on whilst sleeping.
Earnings Results

Fisher & Paykel share price exhales following ‘strong’ full-year results

The COVID-19 tailwind is beginning to taper off, but how did Fisher & Paykel perform in FY22?

Read more »