Nufarm shares did relatively well yesterday despite revealing a small writedown on the value of its business in Russia and Ukraine which did nothing to detract from confirmation the company will earn almost as much in the March 2022 half as it did in all of 2020-21.
The provision for the Russia-Ukraine losses will be around $30 to $40 million and the company said the earnings contribution was negligible.
But the company still told the market that would still see underlying earnings before interest tax depreciation and amortisation in the range of $320 million to $340 million for the first half.
The update supported the confidence shown in a shorter update given in February when the company told the market.
“…revenues for Q1FY22 have increased 36 percent compared to Q1FY21 supported by favourable weather conditions, particularly in Australia and the continuation of strong customer demand in all regions for Nufarm’s crop protection and seed products. Nufarm is experiencing upward pressure on costs due to raw material costs and global logistics challenges which is being offset by the increased revenues.
“While agricultural conditions and the outlook for soft commodity prices remain favourable, Nufarm expects earnings in FY22 will be heavily weighted to the first half of the financial year and is increasingly confident of revenue and earnings growth for the full FY22 financial year,” the February update ended.
CEO Greg Hunt said in Tuesday’s update that “Nufarm has seen strong demand and increased revenues for our crop protection and seed products during the first half.”
“This is a result of the soft commodity prices and favourable trading conditions in each of the regions we operate in, our strategic initiatives and the investments we have made in our portfolio. This is consistent with the positive outlook highlighted at our investor day in February.”
“Nufarm notes that there continues to be uncertainty and volatility in relation to active ingredient pricing, global supply chain and logistics challenges. This uncertainty has contributed to an increase in forward sales in the first half.”
The company again said it anticipates that underlying EBITDA this financial year (To September 30) “is likely to be more skewed to the first half of the financial year than was experienced in FY21.”
So that means a notable second half slowdown, but earnings will, at this stage, be clearly better than 2020-21 when the second half recovery seen last year enabled a 4 cents per share final to be paid after the interim was omitted.
The shares lapped that up and they ended the day up 2% at $6.90, a strong performance given the 155 point or 2.08% slide in the ASX 200 yesterday.
Nufarm says it will release full interim results on May 19.
