Nufarm yesterday confirmed previous guidance that suggested the company had enjoyed a very profitable 2008.
The company said tax paid operating profit rose 36% to $163.9 million for the year ended July 31. Reported profit for the period was $137.9 million, after the $26 million after tax impact of non operating losses.
The operating profit was slightly above the August guidance "of between $155m and $160m".
The company said this was "above earlier company guidance but broadly in line with market consensus".
Despite doing a touch better, the shares rose 190c to $15.28 after trading through the range of $15.65 to $15.16.
The shares rose, then fell, despite the company reaffirming its August guidance for the 2009 result saying it remains strongly focused on its geographic and product portfolio expansion strategy and is in an excellent position to again achieve strong revenue and earnings growth in the current 2009 financial year.
The company is still forecasting an after tax operating profit of between $220 million and $230 million for the year to July 31, 2009.
Group revenues in 2008 increased 41% to $2.49 billion and operating earnings before interest and tax (EBIT) was up 53%, to $308.9 million, over the prior year. Earnings per share (on an operating basis, excluding discontinued operations) were 69.7c, compared with last year’s 59.2c, an increase of 18%.
The result – a record operating profit for the company – reflects strong performances from all of Nufarm’s regional crop protection businesses against a background of positive business conditions for the company and for agriculture in general.
Australasia generated $875 million in sales (35% of total sales) but, as a proportion of total sales, continues to decline due to the increasing importance of other regional businesses. North America recorded $631 million in sales (26% of total); South America generated total sales of $431 million (17%); and Europe $555 million (22%).
The Australasian business generated $875 million in sales and a Segment profit of $147.6 million in the 2008 financial year. This represents revenue growth of some 28% on the previous year and 44% growth in segment profit over last year’s somewhat depressed results due to the prevailing dry conditions that affected most parts of rural Australia.
North American sales – at $631 million for the year – were up by 22% in Australian dollars, but increased by just over 30% when measured in local currencies. This continued a very positive trend of revenue growth in this region over a number of years. Segment profit in North America improved by 32% to $84.5 million.
South American sales totalled $431 million for the 12 months to the end of July. This is the first year South America has been reported as a separate geographic segment. Segment profit was $59.3 million. On a pro-forma basis – assuming the company’s Brazil operations were 100% owned and fully consolidated for the full 12 months of the previous year – this compares with 2007 South American sales of $337 million and a segment profit of $49.2 million.
European sales were up by 26% year on year to $555 million, with segment profit improving substantially ($56.2 million versus $36.8 million in 2007).
The company’s total net profit of $137.9 million included a $26 million after tax loss associated with non operating items.
The major non operating item was associated with a previously disclosed barter trade contract in Brazil that was terminated at an after tax cost of $22.6 million. A thorough review of the company’s barter trade practices in Brazil has subsequently resulted in new risk management policies and head office authorisation requirements.
There was also a net non-cash foreign exchange loss of $2.8 million at July 31 relating to the company’s Step-up Securities (NSS). The foreign exchange exposure on the funding utilisation from the NSS has been hedged over the term of the securities and will guarantee a cash gain of $19.6 million on maturity in the 2012 financial year.
Directors declared a fully franked final dividend of 23c per share, resulting in a full year dividend of 35c. This is 9%, or 3c, higher than the dividend paid in the previous year.
The final dividend will be paid on November 17. The company has previously advised the market that the growth of the company’s business outside of Australia – combined with an increase in dividend payments and a higher number of shares on issue – will result in lower franking credit capacity in the future.
This dividend is likely to be the final fully franked dividend the company will be in a position to pay.
The level of franking credits on future dividends will depend on the amount of future taxation paid in Australia. Directors said they will review the company’s dividend distribution policy before payment of the next dividend.
Directors have also approved a dividend reinvestment plan (DRP), whereby shareholders will be given the opportunity to reinvest dividend proceeds in Nufarm shares offered at a 2.5% discount to the volume weighted average price calculated over a period and on a basis to be determined by the Board.
“It is intended that, pending clarification of current changes to ASIC regulations, that the DRP be fully underwritten. Details of the plan and election notices will be mailed to all shareholders.”
Nufarm said that while the instability in global finance markets is causing difficulties for several significant overseas financial institutions, "Nufarm has no facilities with any of these financial institutions".
Nufarm said “it was involved in a highly seasonal business and, as such, maintains significant short term financing lines with its relationship banks.”
"Many of these lines have annual r
