Agricultural chemicals group Nufarm’s biggest shareholder, Japanese group, Sumitomo, has bailed out the Australian company by paying $1.2 billion for a key asset in a move that will allow Nufarm to slash a worrying debt burden.
As well as this sale – which will be completed early in 2020, Nufarm will repay $91.9 million in preferred shares sold to Sumitomo as part of a capital injection earlier this year.
And the company has maintained the suspension of dividends for the final that it revealed for the interim earlier this year. Nufarm had paid 11 cents a share for 2017-18.
News of the asset sale – Nufarm’s central and South American operations – saw the shares surge to close up 26.4% at $5.64.as investors concluded that the threat to the company from the impact of the drought in Australia and especially high debts ($1.24 billion) had been addressed.
Nufarm reported a net profit after tax of $38.3 million, compared to a net loss of $15.5 million in the year prior. Excluding significant items, net profit was down 9.5% to $89 million.
Revenue up 14 per cent to $3.758 billion with growth reported in all regions except Australia/New Zealand The company said its underlying EBITDA (earnings before interest tax depreciation and amortisation) rose 9% to $420 million “driven by a full-year contribution from the European portfolio acquisitions and growth in the North America, Seed Technologies and Asia business segments.”
Net debt was reduced 9% to $1.247 billion with the $296 million equity raising (and the sale of the proceeds to Sumitomo) helping keep a lid on the blowout in debt and financing costs. Interest topped $107 million for the 12 months, up from $92 million the year before.
In a statement with the results yesterday Nufarm Managing Director and CEO, Greg Hunt, said it had been a difficult year for the global agricultural industry but Nufarm had delivered a steady performance and was well placed to deliver further earnings growth and cash generation as conditions improved.
“A full-year contribution from the acquired European portfolios and strong performances in North America, Seed Technologies and Asia have driven earnings growth for 2019.
“While earnings are up, external headwinds constrained performance. The work we have done in 2019 sets a strong base to continue to improve earnings and cash generation in 2020.
“We’ve largely addressed the significant inventory overhang from drought conditions in Australia and made good progress in re-setting the cost base to make this a more resilient business while maintaining upside exposure to improved weather conditions.
“We have completed the integration of the portfolios we acquired in Europe last year and further strengthened our management and commercial teams. There is strong customer demand for the new product portfolio and the actions we have taken to increase control of the supply chain will address product availability issues we experienced in 2019 and contribute to earnings growth in 2020.
“Our North American, Asian and Seed Technologies businesses have delivered a strong performance given the external conditions and each provides further upside to improved weather conditions.
