Crop protection and seed technologies company, Nufarm Limited (ASX: NUF) looks attractive to investors as the stock price surged 2.879% with the daily volume change of 6.88 million shares on 15 March 2019. The stock last traded at $5.360 while the market capitalisation stood at $1.98 billion.
It has been seen that in the long-run, the stock has returned a decent yield demonstrating 38.63% upside momentum in the past five years. However, the stock continued to stand in red in short-term as the stock price declined 12.29% in the past three months including negative movement of 7.79% last month.
On the fundamental front, Nufarm has delivered strong EBITDA growth with Underlying EBITDA margin CAGR of 8.2% for FY14-FY18. In the Fiscal Year 2018, the company reported underlying EBITDA of $386 million underpinned by the revenue of $3.31 billion, up 6% compared to Fiscal 2017.
Nufarm is an input supplier to global agriculture that experiences demand for crop protection getting highly influenced by climatic conditions. On the basis of weather conditions, the timing and extent of cropping activity is determined including pest, weed and disease pressure. In the year 2018, Australia experienced severe droughts in many regions that led to one of the driest autumns in 100 years, resulting to an extremely poor winter crop season. As a result, Nufarm’s FY18 Reported NPAT declined as massive as 114%, reporting a loss of $16 million. This compares to the profit of $114 million in the previous corresponding period. However, the loss was partially offset by the contribution received from European acquisitions including the product portfolio of FMC Corporation and Adama & Syngenta.
Nufarm also witnessed the long winter and dry spring/summer conditions in Europe that resulted in the delayed sales and collections. This outlines significant volatility across the business of the company that is vastly dependent on weather conditions and the subsequent price change within the crop protection products market.
For Fiscal 2019, Nufarm has forecasted a partial earnings recovery while achieving further growth in the United States. The company has placed its underlying EBITDA guidance at the range of $500 million-$530 million.
To support its solid growth outlook, Nufarm is progressing its manufacturing capacity expansion in the Americas with plans for a manufacturing base to be established in South of Brazil and a new plan in Greenville, Mississippi to serve the key Southern US cropping regions.
The company further expects net interest expense to be $105 million to $110 million in Fiscal 2019, accounting for full-year acquisition debt funding and higher working capital coming into the year. Whereas, it expects FY19 PPE and intangibles capex to be $160 million - $170 million and FY19 depreciation and amortisation to be within the range of $160 million - $170 million.
Nufarm stated that LATAM exposures would continue to be actively hedged at the cost of approximately $20 million for Fiscal 2019. Moreover, Nufarm’s growth strategy aims at achieving margin expansion with a focus on differentiated products and operational efficiencies.
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