Nufarm Limited (ASX: NUF) is a leading manufacturer and seller of seeds and crop protection solutions. The company has released its half-year results for FY 2019 in which it reported group revenue of $1.58 billion which was 8% higher than the previous corresponding previous period (pcp), driven by strong sales growth in the key markets of North America and Latin America.
The company also witnessed strong Sales in European and Asian regions and it was able to generate stronger revenues through its seed technologies segment. However, the Australian business was negatively impacted by continuing dry conditions. It is expected that the challenging climatic conditions in Australia will continue in 2H19 due to very low sub-soil moisture levels in key cropping areas and expectations of a poorer than average season in Eastern states.
The company reported Underlying earnings before interest, tax and amortization (EBITDA) of $120.9 million which was 2% lower than pcp. The company reported EBITDA growth in North America, Latin America and the Seed Technologies segments largely offsetting declines in Europe, Australia/New Zealand and Asia.
Further, the company reported Underlying earnings before interest and tax (EBIT) of $38.9 million which was 48% lower than pcp. Underlying EBIT included the first-time impact of amortization costs relating to the acquisition of the European portfolios last year.
The company’s Average net working capital to sales (ANWC/Sales) increased by 750 bps to 45.3%, driven by the increased receivables in North America and Latin America after strong first-half sales in those markets, and inventory build in North America and Europe in preparation for the upcoming northern hemisphere season. It is expected that the company’s net working capital will decline in the second half of the FY 2019 and is expected to be in a range of $1.3 billion to $1.4 billion at 31 July 2019.
In Europe, the company is experiencing a slow start to the season with dry weather continuing into the autumn period which has contributed to higher than normal channel inventories and delayed purchases. Due to the continued dry weather in Australia, the slow start to the season in Europe in the first half and the supply issues being experienced with the acquired portfolios, EBITDA for FY 2019 is expected to be in the range of $440 million to $470 million. Further, the company’s Net interest expense for FY19 is expected to be around $105 million, with the guidance for foreign exchange impact to be in the $15 to $20 million range, assuming $1 million to $1.5 million per month of hedging cost for Latin America in the second half.
In the last six months, the share price of the company decreased by 16.03% as on 19 March 2019. NUF’ shares are trading at $4.40 (-20.863% intraday) with the market capitalization of circa $2.11 billion as on 20 March 2019 (AEST 01:47 PM). It has 52 weeks high of $9.445 and 52 weeks low of $4.270.
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