Nufarm shares soar on results

Nufarm has major logistical delays in transporting product across Europe at the moment because of the coronavirus.

Analysts said the company’s shares had not fallen as much as other companies in recent months during the coronavirus issues because of the essential role which food and crops played during the crisis. Picture: Yuri Kouzmin

ASX-listed crop protection and seeds company Nufarm is watching the impact of the coronavirus on its international operations.

Chief executive Greg Hunt said the company’s operations in Europe had been hit by logistical delays in crossing borders but its raw material supplies from China were now starting to come through as business in the county began to return to normal in the wake of the crisis.

He said the company’s operations in Australia and North America were improving after being hit by the severe drought in Australia and major flooding in the US corn belt.

Nufarm’s shares rose by 18.5 per cent, or 78c, to $5.00 on Wednesday after the company reported a first-half loss of $122m for the six months to the end of December, a big jump from the $14m loss reported for the six months to the end of December 2018.

The company had already warned the market earlier to expect a first-half loss given difficult trading conditions for Australian farmers as a result of the drought.

Mr Hunt said the drought in Australia had hit its revenues by $50m over the period with weather conditions also reducing revenue on its Indonesian operations by $30m.

He said the company was now starting to see supply of raw materials coming out of China as the government removed restrictions on transport and had opened up the port of Shanghai.

“They have opened up the port and are encouraging local manufacturers to ramp up production,” he said.

Mr Hunt said Nufarm’s three manufacturing operations in Australia – two in Victoria and one in Western Australia – were operating as normal despite the coronavirus.

He said the coronavirus crisis showed the importance of being able to manufacture locally to supply Australian farmers.

But he said there were major logistical delays in transporting product across Europe at the moment because of the virus.

“In Europe we have trucks waiting for eight to 10 hours to get across borders.”

He said the company had one factory in Austria which was also operating at 40 per cent of production because of an employee who had been affected by the virus.

Mr Hunt said the mood in Australia among farmers was “more positive than it has been for a long time” following the rains which had helped ease the drought in some areas.

Mr Hunt said the company’s free cash flow had improved by $170m during the year. Picture: Yuri Kouzmin

The company reported on Wednesday that its revenue for the half year was down by 6 per cent to $1.47bn.

Underlying earnings before interest, depreciation and tax were down sharply by 45 per cent to $66m, in line with its previous predictions.

Mr Hunt said the company’s free cash flow had improved by $170m during the year.

He said its balance sheet was expected to strengthen following the sale of its South American businesses on April 1.

“While the outlook for the second half is obscured by the uncertainties created by COVID-19, we are seeing stronger demand following the recent improvement in weather conditions,” he said.

“We have made significant investments in our European, Nuseed and North American businesses in recent years,” he said.

“We expect increased earnings from these investments, along with continued improvement in our Australian business, to contribute to lifting returns for shareholders in coming years.”

Analysts said the company’s shares had not fallen as much as other companies in recent months during the coronavirus issues because of the essential role which food and crops played during the crisis.

The company has continued to suspend its interim dividend.