Nufarm Result a Story of Two Halves

Investors took Nufarm shares higher yesterday, despite a clear warning that second half earnings will come in much lower than those for the six months to the end of March.

Nufarm, a crop protection and seed company, told the ASX that strong growth in its seed technology business had helped push it to a $58.9 million first half profit, on a 20% jump in revenue to $1.65 billion.

There’s no dividend, again as the company said a review of capital management principles will be finalised by end 2021, suggesting that the next dividend could be in a year’s time.

Nevertheless, investors liked the news and sent the shares up 3.3% to $5.05.

They ignored the waring that the company expects its full-year result will be weighted heavily towards the first six months of the year.

In its outlook for the rest of the year Nufarm warned that its full year net profit after tax (NPAT) is expected to be lower than first half NPAT due to the earnings skew to the first half. That suggests the full year NPAT will be less than the $58.9 million first half figure.

Underlying earnings more than doubled to $233.6 million as all regions improved, with particularly strong growth in Asia-Pacific and Europe.

“Strong early demand and channel restocking in key markets has delivered a very strong first half result,” CEO Greg Hunt told the ASX in a statement with the results.

“We are realising benefits from the leverage of our APAC business to improved seasonal conditions and the earnings recovery in our European business is on track.

“Our North American and Seed Technologies businesses are delivering good growth, with currency translation impacts somewhat masking the true underlying performance of our North American business.”

Mr Hunt noted that full-year earnings are forecast to be significantly weighted to the first half period.

“We have delivered a strong first half result and momentum has continued into the second half, however this has not altered our expectations for the full year,” he said.

That’s something for investors to keep in mind over the next six months or so.

 

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.

View more articles by Glenn Dyer →