Home' Nufarm Annual Report : Nufarm Half Year Report 2015 Contents 05
NUFARM LIMITED HALF YEAR REPORT 2015
REPORT TO SHAREHOLDERS CONTINUED
SIX MONTHS ENDED 31 JANUARY 2015
control glyphosate resistant weeds.
Insecticide sales were down slightly
on the prior period ($163 million
versus $171 million). Generally dry
conditions and low insect pressure
in key markets reduced demand
for insecticide applications.
Fungicide sales were $106 million,
up on the $100 million recorded in
the first half of 2014. The fungicide
portfolio performed strongly in the
period, with relatively low disease
pressure in Brazil and Australia
offset by a positive autumn season
in Europe and North America and
the continued roll-out of new
Sales of biorational products,
plant growth regulators, adjuvants,
machinery and industrial products
were $109 million (2014 first half:
$102 million). The company continues
to strengthen its position in the
expanding biorational and plant
growth regulator segments, with
additional product launches
helping to grow sales.
The company’s seed technologies
segment includes sales of seeds,
managed under our Nuseed business,
and seed treatment chemistry.
Segment sales were down in the
first half compared to the previous
year ($43 million versus $54 million)
and the segment generated a loss
of $5.2 million at the underlying
EBIT level, compared to a positive
contribution of $3.3 million in the
corresponding period last year.
With higher value sales in the period
down on the prior year, the segment
generated an average gross margin
of 41 per cent versus 49 per cent in
the first half of 2014. A higher value
product mix in the second half is
expected to result in a stronger
average gross margin by year end.
The business faced some challenging
conditions in the first half in a
number of its higher value markets.
Dry conditions in Australia limited
summer sorghum and sunflower
plantings, increased competitive
activity in the China sunflower market
impacted on sales and margins and
United States based seed treatment
sales were down on the prior half
Changing dynamics in the China
confectionary sunflower market are
resulting in deterioration in both sales
and value potential for Nuseed and
the company is re-evaluating its focus
on, and investment in, that market.
With confectionary markets in North
America and Europe continuing to
develop positively, the company still
sees substantial opportunities for
growth in this high-value segment.
There was an increased investment
in research and development in
the seeds business, with excellent
progress on the continued
development of new hybrid varieties
and other pipeline projects.
The first field trials associated
with the company’s DHA omega-3
canola project were completed
and produced encouraging data.
Follow-up field trials are now underway.
A combination of adverse weather
and increased competition resulted
in lower than expected sales of seed
treatment applications in the first half.
A number of new alliances were
finalised that will provide access
to additional chemistry for seed
treatment products, with these
new products expected to generate
higher sales over the coming years.
Net debt at the end of the first
half was $890 million, some $130 million
lower than at 31 January, 2014
($1.02 billion). Despite growth in the
business and an adverse currency
impact, average net debt for the first
half was $793 million compared to
$908 million in the first half of 2014.
Average net working capital for the
half was $160 million lower than for
the same period last year. Average
net working capital to sales was
43.9 per cent; also well down on the
49.4 per cent at the end of January
last year. Management is targeting
average net working capital to sales
to be at or below 40 per cent
by 31 July 2016 (31 July 2014:
47.7 per cent).
All major crop protection regions
reported an improvement in average
net working capital to sales. Across
the group, receivables were up
slightly on the prior period,
inventories were down and
payables were higher.
Gearing (net debt to net debt
plus equity) was 34.8 per cent
(2014 first half: 38.3 per cent).
Sales by product segment
Total $1,183.7 million
Other includes equipment, adjuvants, plant growth regulators
* Seed technologies includes seed plus seed treatment.
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