Nufarm (ASX:NUF) falls despite earnings growth

Agricultural chemical company Nufarm (ASX:NUF) has reported strong financial results for year ending September 30, driven by revenue and underlying earnings growth in all regions and its seed technology business.

Total revenue increased 10 per cent from the prior year to $3.2 billion, while underlying earnings before interest, taxes, appreciation and amortisation jumped 51 per cent to $370 million. Underlying net profit after tax reached $61 million, a turnaround from the $73 million loss in the prior year.

The company said the rise in earnings reflects the improved conditions and commodity prices, with tight supply driving strong demand for Nufarm products. 

“The outlook for soft commodity prices remains positive and improved seasonal conditions in key grain producing regions is resulting in continued demand for seeds and crop protection product. In addition our seed technology business, Nuseed, is developing crops that look to positively impact global environmental issues and provide new economic opportunities for farming communities,” said CEO Greg Hunt. 

The uplift in performance meant Nufram declared a return dividend of 4 cents per share, its first dividend since 2018 after a 2-year suspended period due to “challenging agricultural conditions.”

“Earnings growth and a focus on working capital management is driving strong cash generation. Our balance sheet has been reshaped over the past two years and now provides us with flexibility when faced with seasonal and market challenges and optionality to pursue future growth potential and capital management initiatives.”

While no guidance was given for the year ahead, as mentioned, the company appears optimistic that the positive momentum will continue.

“We continue to monitor ongoing industry-wide supply chain and logistical issues. Increasing cost of raw materials as well as global logistics and supply chain challenges, will continue to pressure margins, however we expect price increases and volume growth will provide an offset.”

“Our core objective for FY22 is to continue to drive our long-term growth plans whilst at the same time focusing on optimising trading, improving margins and lifting cash generation.”

Shares in Nufarm (ASX:NUF) are trading 9.6 per cent lower at $4.54.