Earnings News: Nufarm, Sigma, New Hope Coal

Three results including two from yesterday – from Nufarm and Sigma Healthcare – confirm that the figures are historical and useless for assessing the company’s outlook for the rest of the year and into 2021 in the wake of the impact of COVID-19.

Nufarm made a loss as expected with the agricultural chemical and seed company slumping to a forecast first half loss of $122 million first half loss, thanks mostly to the drought in much of Australia through January.

Revenue fell 6% to $1.48 million, while underlying EBITDA (earnings before interest, tax, depreciation and amortisation) fell a hefty 45% to $66 million.

Nufarm will not pay an interim dividend.

Nufarm’s $122 million first half 2020 loss compares to a $14 million loss for the first half of 2018-19.

“The first half of 2020 saw a continuation of the challenging conditions we experienced in 2019. Nonetheless, we have made good progress against the priorities we set for the current year,” Nufarm’s chief executive Greg Hunt said in a statement

The company’s financial position would be much stronger following the completion of the sale of its South American businesses at the beginning of April, he said.

This transaction will leave Nufarm with continuing operations in Europe, North America, Australia/New Zealand, and Asia.

“While the outlook for the second half is obscured by the uncertainties created by COVID-19, we are seeing stronger demand following the recent improvement in weather conditions,” Mr Hunt said.

“We have made significant investments in our European, Nuseed and North American businesses in recent years. We expect increased earnings from these investments, along with continued improvement in our Australian business, to contribute to lifting returns for shareholders in the coming years,” he said.

The shares rose 18% to $5.00 as investors were happy there were no more bad news surprises in the results and a belief that the drought has ended in many areas and farmers will start restocking and re-ordering Nufarm products.

Meanwhile shares in Sigma Healthcare fell more than 2% yesterday (in a stronger wider market) after the company played down the impact on earnings guidance from the recent boost to sales from the COVID-19 virus.

The company said its strong recent growth has received an additional boost by “abnormally high demand” due to the coronavirus but declined to provide earnings guidance at its full year results on Wednesday due to uncertainty about how it will impact the current financial year.

Investors didn’t like that and the shares fell 2.1% to 68.5 cents in a market that closed more than 5% higher after a late kick.

“While we have seen a significant increase in demand for medicines and FMCG (fast moving consumer goods) products for the first seven weeks of this financial year, it is impossible to predict how this will unfold for the remainder of the year,” Sigma CEO Mark Hooper said in a statement yesterday.

Earnings for the year ending January 31 were in line with its revised December guidance for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $46.7 million, down from $89.6 million the prior year due to Sigma losing the Chemist Warehouse contract. That saw sales fall 18% to $3.4 billion for the year.

The company did not declare a final dividend for the year (last year 2 cents a share) and said the interim dividend for the current year will also be suspended.

The interim results from coal miner, New Hope Group were all a bit historical – predating the gathering impact of COVID-19.

Revenue for the six months to the end of January was in line with the prior corresponding period at $618 million, but that was achieved with a 42% rise in sales sufficient to all but offset a 29% slump in coal prices in the half year.

That saw earnings Before Interest, Tax, Depreciation and Amortisation, before non regular items, slide 25% to $213 million, from $285 million in the January, 2019 half year.

Statutory net profit for the half slumped 42% from $120.2 million to $69.8 million.
Interim dividend was set at 6 cents a share, down 25% from the 8 cents a share in the previous corresponding period.

CEO Shane Stephan said the result was pleasing and largely due to the continued success of the Bengalla operations in NSW’s Hunter Valley.

“Bengalla continues to shine with the production of 4.3 million tonnes of coal (New Hope share) in the six months to January 2020, an increase of 84% on the previous year,” Mr Stephan said.

“This saw a corresponding lift in coal sales, both internationally and domestically with the Company exporting 5.8 million tonnes, up 32% on the PCP and 0.6 million tonnes domestically, up 469% on the PCP.”

Mr Stephan said, on current numbers, Bengalla was on track for another record year of production although the second half production is expected to be lower than the first half due to normal mine sequencing.

“The increase in production has been achieved while maintaining an outstanding safety record across all sites,” Mr Stephan said.

“Strong cost management across the business, along with a net increase in coal production will see results remaining positive throughout the second half of the financial year,” Mr Stephan said.

“The Company has access to sufficient funds for current and future development and the industry continues to attract funding both domestically and internationally.

“Our focus for the future remains on safe and efficient production at existing operations and a commitment to maintaining long term relationships with our suppliers and customers.”

The shares jumped 17% on Tuesday to end at $1.20. They rose another 5.4% yesterday to $1.26. They are still down more than 40% since the start of 2020.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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