Agricultural chemicals group Nufarm (NUF) has boosted dividend for the year to July 31 after reporting a solid rise in profit, despite the impact of one-off costs, and says it expects another solid performance in fiscal 2016 amid subdued market conditions.
Nufarm shares responded solidly to the news and they jumped 7% to close at $7.57, no mean achievement in the bloodbath that was the ASX yesterday.
The company will pay an unfranked final dividend of 6 cents a share, up from 5 cents a share a year ago.
Combined with the unfranked interim dividend of 4 cents a share, total dividend for the year is 10 cents a share, up 20% from the 8 cents a share paid in 2013-14.
In the year to July 31, Nufarm posted a net profit of $43.22 million, up 14.6% on the previous year’s $37.7 million.
That figure included $73.8 million in one-off costs associated with restructuring initiatives and asset rationalisation. Excluding those items, Nufarm’s net profit rose 35.5% to $117.06 million.
That was on a 4.4% rise in revenue in the year to $2.737 billion, while underlying earnings before interest and tax (EBIT) jumped 18.1% to $236.9 million.
Nufarm said cost-savings benefits, margin expansion and revenue growth in a number of the company’s businesses were expected to result in another solid profit performance in the 2015-16 year.
"This is despite an expectation that general market conditions will continue to be subdued," the group said.
NUF 1Y – Nufarm shares higher despite "subdued" market conditions
Nufarm said it expected growth in the US on the back of new product introductions and stronger support from local distribution, despite soft commodity prices and tighter farm economics in the Americas. Solid growth is also forecast in Europe.
"A strong focus will be maintained on balance sheet objectives, in particular working capital efficiencies, with the aim of reducing average net working capital to sales below 40 per cent by July 2016," Nufarm said yesterday.
“We feel confident that 2016 will be another year of solid earnings growth," Nufarm CEO Greg Hunt said yesterday.
"New product introductions and a more focused approach to key crop segments will help drive underlying growth."
Mr Hunt said lower crop prices and the desire for farmers to reduce costs would affect the total value of crop protection sales in most markets, particularly in the US and Brazil.
Nonetheless, Nufarm expects earnings growth in the US, and growth in local-currency earnings and market share in Brazil.
Earnings from the Australian market are expected to continue to recover as a result of cost-cutting initiatives already under way.
Nufarm has included the likely impacts of an El Nino weather pattern in its forecasts. An El Nino typically results in drier-than-normal spring conditions and possible drought in much of eastern Australia.
Mr Hunt said Australia had already experienced dry spring conditions for the last three years.
As a result, Nufarm does not consider impacts from El Nino to be a material risk to earnings growth in Australia in 2016.
Looking beyond fiscal 2016, Nufarm expects to be in a strong position to deliver sustainable earnings growth and improved shareholder returns over the medium to long term.
It said this will be driven by the performance improvement program, as well as profitable growth opportunities across products, crop segments and geographies.
