Home' Nufarm Annual Report : Nufarm Annual Report Contents Important progress has been
achieved since the re-organisation
was announced, involving annualised
savings of $6 million and relating
to the rationalisation of back office
positions. The balance of total cost
savings will be achieved as several
manufacturing plants are closed over
the next two years. For financial year
2015, estimated annualised savings
will be $5 million, with further savings
of $5 million expected to be achieved
in financial year 2016.
Net external interest costs3 were
$64.3 million (2013: $50.5 million).
Higher levels of average net debt
and higher bank base rates in Brazil
were partially offset by reduced credit
margins negotiated as part of the
renewal of the syndicated bank facility.
Total net financing costs increased
from $70.7 million in the prior year to
$88.0 million. This included the impact
of foreign exchange losses that totalled
$12.6 million (prior year $10.7 million),
with almost half of those losses relating
to the devaluation of currencies in
Argentina and Ukraine.
The underlying effective tax rate was
23.2 per cent. The lower than normal
tax rate was driven by a number of
individually immaterial one-off credits,
mostly relating to tax credits in Brazil.
It is expected that the future underlying
effective tax rate will be approximately
30 per cent.
The business generated strong net
operating cash inflows of $268.1 million,
well up on the $62.8 million generated
in the prior period.
Balance sheet management
Net debt3 at year end was $513 million,
a material improvement on the
$633 million recorded at the end of the
previous financial year. The reduction
in net debt at balance date was driven
by a focus on working capital targets
delivering strong second half cash flow.
Average net debt3 was $913 million,
compared to $753 million in 2013.
Net working capital3 at 31 July was
down by $169 million to $842 million.
This was achieved via a more disciplined
approach to the management of
working capital, supported by a
range of initiatives implemented
across the business. The major driver
of the reduction in working capital was
more efficient inventory management,
with year-end inventories finishing
at $633 million, compared to
$803 million at 31 July 2013.
Average net working capital3 was
$1.25 billion, compared to $1.07 billion
in the prior period. As a proportion
of sales, average net working capital
was slightly up on the previous year
(47.7 per cent versus 46.8 per cent),
reflecting the high starting point and
large levels of working capital in the
first half. Management has targeted
an average net working capital to
sales ratio of 40 per cent within the
next two years.
Gearing (net debt to net debt
plus equity) was 24.2 per cent
(2013: 27.6 per cent).
People and organisation
Our talented and committed
employees around the world have
again contributed strongly to the
profitable growth of the company
during the 2014 financial year.
We operate in highly competitive
markets, where the strength of our
people and their relationships with
key stakeholders can provide an
important competitive advantage.
We continued to encourage innovative
thinking by providing training and
development programs, and fostering
the leadership qualities that will
support the growth of the business.
Our commitment to providing a safe
working environment is also supported
by appropriate training and awareness
programs and we expect to achieve
continuous improvement across a
range of safety and environmental
With a return to more normal seasonal
conditions in Australia and the US,
the company is strongly positioned
to generate growth at an underlying
EBIT level in 2015.
Spring and summer rains in northern
NSW and Queensland are needed to
generate demand for crop protection
products in Australia and to establish
an important first half platform for the
business. The restructuring program
will be further progressed in 2015,
with associated cost savings helping
to drive earnings recovery.
If the US experiences more normal
weather patterns – particularly in
the spring period from March to
May – Nufarm’s business will be
able to capitalise on a stronger
product portfolio and generate
a significant recovery in earnings.
MANAGING DIRECTOR’S REVIEW CONTINUED
06 | NUFARM LIMITED ANNUAL REPORT 2014
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