Shares in agricultural chemicals supplier Nufarm were sold off sharply in yesterday’s solid market, despite the company reporting a solid interim profit.
The shares were down 5% at one stage, but recovered somewhat to be off 3.3% at $4.92.
The company told the ASX yesterday that net earnings jumped to $18 million for the six months to January 31, compared to just $4.4 million in the corresponding period of the previous financial year.
Earnings before interest and tax (EBIT) improved markedly with group operating EBIT up 11.8% to $37.8 million.
In Australia they rose by a third to $40.8 million compared to last year’s $29.6 million, and in South America they soared to $11.2 million compared to just $1.3 million in the depressed first half of 2010-11.
But Europe saw a loss of $0.4 million after a $6 million of EBIT in the front half of the 2011 financial year.
And sales remained sluggish in other parts of the company’s world, leading to lower EBITs in the US $400,000 down from $4.4 million) and Asia, steady at $9.2 million.
Group sales fell to $863 from $901 the previous year, thanks mostly to the stronger Aussie dollar. Adjusting for that on a constant currency basis sales rose to $922 million.
Nufarm said it earned a gross profit margin of 26.9% on sales up from the 24.5% recorded in the 2011 first half period.
Nufarm declared a fully-franked interim dividend of 3c, a sign of the improvement of the company’s fortunes as no dividend was paid in the 2010-11 financial year.
Nufarm said the net profit of $18 million included material items that generated an expense of $5.9 million, after tax.
Costs of approximately $6.9 million were associated with one-off fees relating to the 2010 12-month refinancing package that was repaid in November 2011. Other one-off costs related to restructuring activity, amortisation expenses associated with chemistry that is being phased out in Brazil and litigation costs.
The company recorded a one-off gain of $5.8 million on the ‘mark-to-market’ revaluation of Nufarm’s Step-up Securities.
The company said that the variable results of the first six months came ahead of major selling seasons in markets, with large winter cereal crop plantings expected to bring benefits in Australia, as the rains have left many areas with good subsurface moisture profiles.
Mr Rathbone noted gains from stronger demand for crop protection products in Brazil and in Australia, with restructuring in Brazil in 2011 and continued savings from stricter capital management in Australia.
The high Australian dollar had helped Nufarm domestically, with reduced input costs.
"There are very strong planting forecasts for the USA and a relatively early spring should be helpful for our businesses," Mr Rathbone said.
But Europe remains a concern (and is why the shares weakened yesterday).
Mr Rathbone said the European business was tracking behind budget and faced some challenges over the balance of the year.
"Seasonal conditions in Europe are very mixed and there is increased business risk associated with economic pressures in a number of European countries. We will step away from business in those markets where we judge those risks to be unacceptable.
"We believe any downside in Europe will be balanced by average or generally positive seasonal and trading conditions in most other regions over the remaining months of our financial year," he said.
And Beach Energy says it is aiming to raise $345 million, through a rights issue to shareholders and the sale of convertible bonds, to fund its drilling program.
It announced a one-for-eight rights issue at $1.40 a share, an 11% discount to its last trade, to raise about $195 million.
Beach shares closed at $1.575 on Monday.
The issue will be fully underwritten.
Beach also launched a sale of unsecured 5-year convertible notes to raise $150 million with the interest rate and conversion price to be set through a book build closing on Wednesday.
The shares went into a trading halt before trading yesterday to allow the book build to occur.
Beach said yesterday it planned to spend up to $650 million through June 2013 to expand its gas reserves in the Cooper Basin in South Australia, develop oil finds in Egypt and explore for oil in Tanzania.
"Beach is entering a new and exciting development and exploration phase, which we believe has the potential to transform not only Beach, but also the Cooper Basin and the east coast gas market for years to come," Beach managing director Reg Nelson said in a statement.
The company is looking to supply gas to its Cooper Basin partner Santos’ Gladstone liquefied natural gas project in Queensland from 2014 and said it is also in talks with other potential "large scale" customers.
The funds will also fund the cost of the company’s ambitious drilling program for unconventional gas on the western flank of the Cooper Basin where it has already already drilled two holes that suggest a resource of at least 2 trillion cubic feet of gas.
