Stalled local production and tougher conditions in South America have hit first-half profit at agricultural chemicals supplier Nufarm, but chief executive Greg Hunt says the company will achieve growth in the full year and beyond.
Earnings were down 12 per cent to $75 million in the six months to January 31, hit by an eight week upgrade at its manufacturing plant in Laverton, Victoria, and challenging climatic conditions and price competition in Latin America, where Nufarm derives the majority of its earnings.
Brazil is now the largest crop protection market in the world, despite recent dry conditions reducing the size of crops, according to Nufarm.
“We still see Brazil delivering in line with the same time last year – Latin America is moving toward a one billion dollar business for us,” Mr Hunt said.
Sales and earnings are weighted to the second half of Nufarm’s fiscal year, when the major cropping seasons in Australia, North America and Europe take place, the company said.
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The recent plant upgrade is expected to improve productivity in Australia, and good summer rain in Western Australia, plus recent rain in Queensland and northern NSW, provide an optimistic outlook for the winter, Nufarm said.
It has forecast underlying earnings growth of between five per cent and 10 per cent for fiscal 2017/2018.
Nufarm’s half year net profit of $12 million was down from $20 million a year ealier, reflecting the costs of a recent acquisition spree.
The acquisitions included a European portfolio of crop protection products and a suite of European herbicides, which are expected to begin to deliver additional earnings in fiscal 2018/19.
“Clearly in Europe we expect to see growth, it’s a high-value market, its more diversified and the acquisitions add another $200 million,” Mr Hunt said.
He said Nufarm is nearing the end of its efforts to reduce costs and invest in changes to its business, and is confident it will deliver the promised benefits.
Shares in Nufarm gained 45 cents, or 5.5 per cent, to $8.71.
ACQUSITIONS DENT NUFARM’S HALF YEAR PROFIT
* Net profit down 40pct to $12m
* Revenue up 7.4pct to $1.46b
* Unfranked interim dividend unchanged at five cents