Home' Nufarm Annual Report : Nufarm Annual Report 2016 Contents BUSINESS REVIEW
The company’s cost savings and
performance improvement program
contributed strongly to margin
expansion and the higher underlying
earnings. At an EBIT level, the program
contributed $60 million of benefits to
the 2016 results, and has contributed
a cumulative benefit of $75 million
over the past two years. Strong
earnings growth in Nufarm’s businesses
in North America, Latin America
and Europe more than offset
weakness in Australia and the
seed technologies segment.
Nufarm’s crop protection business
grew sales by three per cent to
$2.65 billion and underlying EBIT
by 21 per cent to $302.5 million.
Crop protection sales accounted
for 95 per cent of group revenues
and generated an average gross
margin of 28.8 per cent, which
is a significant improvement on
the previous year (26.9 per cent).
The seed technologies segment
generated revenues of $143.6 million,
down 10 per cent on the 2015 financial
year ($159.6 million). The segment
posted a 10 per cent decline in
underlying EBIT to $28.7 million.
The global seeds industry faced
challenging conditions, with most
players experiencing earnings declines.
Importantly, key market shares were
maintained, and the underlying
EBITDA margin improved, as
further efficiency savings were
extracted from the business.
The company’s continued focus on
working capital efficiencies helped
drive an improvement in the average
net working capital to sales ratio to
39.9 per cent, and average net working
capital dollars reduced by $32 million.
Although year end net debt was higher,
average leverage across the year was
below the prior period. The return
on funds employed for the period
was 13.1 per cent, compared to
11 per cent in the prior year.
The Australian and New Zealand
businesses generated sales of
$554 million, down five per cent
on the previous year ($582.4 million).
Underlying EBIT was $47 million
compared to $52.7 million in the
Climatic conditions in Australia
were mixed. Western Australia had
a very good season, but eastern
Australia was again dry during summer
and autumn, limiting pre-plant
opportunities. Good rainfall in
many areas from May onwards will
boost yields for farmers, providing
a positive outlook for the summer
A gross margin improvement in the
Australian business reflected a focus
on increased sales of higher margin
products and more disciplined selling
practices. However, this came at the
expense of lower sales of larger volume
commodity products, with a resulting
negative impact on plant recoveries.
The previously announced closure
of three manufacturing facilities in
Australia and New Zealand is now
complete. Two sites – Welshpool and
Lytton – have been sold, with proceeds
received post year end, and the
Otahuhu site is expected to be sold
during the second half of 2016. The
full benefit of these changes should be
realised in the 2017 financial year, as
we achieve improved plant recoveries
with a better balance between higher
margin product sales and volume-
based commodity product sales.
The company achieved margin growth in most of its regional crop
protection businesses, despite overall market conditions being
generally weaker due to the fall in crop prices and lower demand
in some market segments.
Operating segments summary
The table below provides a summary of the performance of the operating
segments for the 2016 financial year and the prior corresponding period.
Year ended 31 July
(%) 2016 2015
- 4.9 46,963 52,745 -11.0
- 4.3 22,824 18,134
1.0 73,017 64,426
653,939 588,650 11.1 59,288 38,921
4.8 100,396 76,684
2.7 302,488 250,910
143,618 159,581 -10.0 28,719 31,829
n/a (44,511) (45,857)
2.0 286,696 236,882
NUFARM LIMITED ANNUAL REPORT 2016
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