Nufarm underlying profit up 18%, near top end of guidance

BUSINESSDESK: Agricultural chemicals company Nufarm's underlying annual net profit rose 18% to the top end of guidance as its business got back on track after several poor years, assisted by a strong performance by its seeds operations.

Bottom-line net profit returned to positive territory, with $A72.6 million in the 12 months ended July 31, compared to a net loss of $A49.9 million the previous year and net loss of $A22.7 million in 2010.

A major factor in the bottom-line turn-around was one-off costs dropping to $A61 million from $A143.7 million. This year's costs included restructuring, debt refinancing and litigation costs, with the largest being its previously reported $A43.5 million settlement with disgruntled investors.

Managing director Doug Rathbone says the company is "well-positioned to generate an improved underlying earnings result in the 2013 financial year" if seasonal conditions prove to be at least average.

Underlying net profit rose to $A115.4 million from $A98.3 million compared to the company's prediction it would come in between $A110 million and $A116 million.

"The underlying result represents strong growth on the previous year and further progress in respect of the company's strategic growth plan," Mr Rathbone says.

Nufarm had performed solidly against a backdrop of mixed seasonal and market conditions in the various geographies in which it operates.

"Australia experienced average seasonal conditions, market conditions in Brazil were mostly positive, although areas of the country were impacted by drought, while the US – after a good start to the season – was impacted by severe drought."

Most European markets experienced "challenging climatic conditions" and suffered from elevated credit and economic risks.

Nufarm's crop protection business, accounting for 94% of total sales, increased sales 3% to $A2.06 billion, while average gross margin was steady at 27%. Its seed technologies business' sales jumped 39% to $A121 million, with average gross margin improving slightly to 53% from 52% the previous year.

Nufarm will pay a fully-franked final dividend of 3 Australian cents a share, taking the year's payout to 6 cents compared to no dividends last year. The results announcement was brought forward from the previously planned September 27 release date.

Nufarm shares closed at $A5.85 on the ASX on Friday, down from their high earlier this month at $A6.31 but well up from $A3.96 in October last year.

Nufarm's NZX-listed perpetual, subordinated, unsecured, redeemable exchangeable notes are up $1.40 per $100 face value at $103.40. The notes have trended higher from $96 per $100 face value on July 26 since Nufarm issued it last profit guidance that day.