Going for a quadrella of announcements this week, Nufarm scored yesterday with its AGM and update on trading.
Plus we had more fulsome apologies and promises to do better after the company’s year from hell of profit downgrades, profit falls, cuts to its credit rating, soaring debt, worried banks, and to cap it off, this week’s $66,000 fine from ASIC for not telling the market for 12 trading days in February – March about a serious profit fall.
Starting with the news on Monday of the retirement of deputy chairman Doug Curlewis, then the year’s extension of its banking debt (was cut by $300 million from the previous package which Nufarm omitted from the statement) and then the ASIC fine, it has been a busy week for the company.
With some analysts more friendly, the shares have risen around 10% from last Friday to the close yesterday. They ended the day at $4.81, up 17c, or more than 3.6%.
The professional end of the market seems to be now looking at the company in a new light, which isn’t so hard to understand as many holders are short term speculators who bought in at lower prices and are now looking for a higher priced exit, or some corporate action by 20% holder, Sumitomo of Japan.
So news of a recovery in the company’s trading position was always going to be well received by one large group of holders.
Nufarm now expects its first-half operating results to return to the black this year, with first-quarter earnings well ahead of last year.
"In summary, our first quarter is generally in line with, or ahead of, expectations in Australia, Asia, North America and North Eastern Europe," Nufarm Chief Executive Doug Rathbone told shareholders at the AGM.
Nufarm says it expects operating profit in the first half of 2010/11 to be $10-20 million, as it says its first-quarter earnings have been ‘‘well ahead’’ of the previous corresponding half.
The improvement is coming from ‘‘stronger earnings in most of our markets and the absence of the negative impacts associated with glyphosate related write-downs of last year’’, Mr Rathbone said.
‘‘Our first quarter is generally in line with, or ahead of, expectations in Australia, Asia, North America and North Eastern Europe.
‘‘Brazil and Southern Europe are tracking behind forecast but we expect activity to pick up in Brazil now that growers have the conditions to accelerate planting activity.
‘‘On an overall basis, our first quarter (earnings) EBIT result is well ahead of where we were at the same point last year and gives us continued confidence that the business can generate an improved profit outcome over the course of the full year.
‘‘For the current half year, we expect an improved operating result compared to the first six months of 2010 in which the company recorded a headline loss of $40 million and an operating loss of $4.5 million.
‘‘For the six months to January 31, 2011, we expect to record an operating profit in the range of between $10 million and $20 million.’’ Mr Rathbone said the guidance relied on variables including trading conditions over the next two months, and climatic factors.
‘‘We will be reporting a number of non-operating or material items at the half year,’’ he said.
‘‘These will include the one-off costs associated with… interim financing arrangements and the (company’s) strategic review.
‘‘The improved overall half year result will be driven by stronger earnings in most of our markets and the absence of the negative impacts associated with glyphosate related write-downs of last year," he said.
Net debt is expected to be lower at the half year than a year earlier, but it will be higher than in July of this year.
‘‘It will, however, be higher than at the July 2010 levels as we build working capital to levels required for the key second half selling period.’’
The contrition came from Nufarm chairman Don McGauchie who told the meeting the company would be more cautious in future with earnings guidance.
‘‘The company has previously followed a practice of providing specific earnings guidance,’’ Mr McGauchie told the meeting.
‘‘We are now taking a more conservative and cautious approach in terms of our outlook statements.
‘‘I believe this is an appropriate stance, given the experiences of the past 12 months and a recognition that there are unknown factors and variables that will influence our earnings, including future climatic conditions and competitive influences on pricing.
‘‘As these conditions become clearer over the course of the year and particularly in the key second half selling period, we may be in a position to provide more complete guidance," the chairman said.
And finally Mr Rathbone and his chairman had a lot of nice words about Sumitomo, who need buttering up as they are having to cope with a share price loss on its $14 dollar entry price of more than $9.
Sumitomo is looking at its options with advisers.
Is this why Mr Rathbone told the meeting of many of the benefits of the link to the Japanese group.
"Since completing its 20% investment in April of this year, Sumitomo has worked with us to identify and put in place a number of commercial agreements that will add value for both companies.
