Home' Nufarm Annual Report : Nufarm Half Year Report 2017 Contents NUFARM LIMITED HALF YEAR REPORT 2017
REPORT TO SHAREHOLDERS
SIX MONTHS ENDED 31 JANUARY 2017
Nufarm Limited’s underlying earnings
before interest, tax, depreciation and
amortisation (EBITDA) increased by
15 per cent to $128.7 million, and
underlying earnings before interest
and tax (EBIT) increased by 19 per cent
to $85.0 million for the six months
to 31 January 2017. Group revenues
increased by 15 per cent to $1.36 billion
(2016 1H: $1.19 billion).
Reported net profit after tax was
$20.0 million, with no significant
material items in the first half. This
compares to a statutory loss after
tax of $91.0 million in the first half
of the previous year, which included
one-off restructuring costs of
Underlying net profit after tax
was $19.8 million, up 67 per cent
on the $11.9 million reported in
the prior period.
Earnings per share (excluding material
items) were 5.2 cents compared to
2.3 cents in the first half of 2016.
The group generated a higher
underlying gross profit margin of
29.1 per cent, compared to 28.2 per
cent for the first half of the prior year.
Average net working capital to
sales was 37.1 per cent, a significant
reduction on the prior period
(41.6 per cent).
Net debt at 31 January 2017 was
$856 million, down on the $927 million
at 31 January 2016. Net debt
benefitted from the proceeds from
non-core asset sales, with the net
cash inflow from material items being
$39 million in the first half.
These half year results reflect strong
growth and continued positive
progress in relation to the group’s
performance improvement program.
Directors declared an unfranked
interim dividend of five cents per share
(2016 interim dividend: four cents).
The interim dividend will be paid on
5 May 2017 to the holders of all fully
paid shares in the company, as at the
close of business on 7 April 2017. The
interim dividend will be 100 per cent
conduit foreign income.
The Dividend Reinvestment Plan
(DRP) will be made available to
shareholders for the interim dividend.
Directors have determined that the
Issue Price will be calculated on the
volume weighted average of the
company’s ordinary shares on the
ASX over a period of 10 consecutive
trading days commencing after the
record date and concluding prior to
the date of allotment of ordinary
shares under the plan. The last
election date for shareholders who
are not yet participants in the DRP
is 10 April 2017.
Net external interest expense was
$46.3 million, which is $6.3 million
higher than the previous period. The
higher interest expense was primarily
driven by Brazil. The net interest
expense for the full year is expected
to be in line with the guidance
provided at the 2016 full year result,
i.e . net interest will be moderately
lower than full year 2016.
Encouragingly, Brazilian bank base
rates are falling, which will reduce the
cost of financing the Brazil business
in the future.
Total net financing costs (excluding
material items) were $52.5 million,
compared to $57.1 million in the prior
year. Foreign exchange losses
(excluding material items) were
$6.2 million, compared to $17.1 million
recorded in the 2016 first half. The
exchange loss mainly relates to the
Latin American operations and is
consistent with the company’s previous
estimate of $1 million to $1.5 million
of hedging costs per month.
The underlying effective tax rate was
38.4 per cent for the period, reflecting
the mix of profits in the first half. This
compares to 16.4 per cent in the prior
period. The company expects the
full year effective tax rate to be close
to 31 per cent. The first half income
tax expense includes a $2.5 million
expense due to a reduction in the
French statutory tax rate (effective
in 2019) and its subsequent effect
on the deferred tax assets on the
French entity’s balance sheet.
The business recorded an
underlying net operating cash
outflow of $187 million in the first
six months of the year. This compares
to a cash outflow of $208 million in
the previous period. The lower cash
outflow was attributable to good
working capital management and
the cash component of the material
items. The material items were a
net inflow of $39 million, including
$49 million from the proceeds of
non-core asset sales. The cash
outflow at the half is caused by the
seasonality of the business, which
sees an increase in receivables in
Latin America and an inventory build
for the second half key cropping
periods in the northern hemisphere
The group generated increased sales
in both major business segments, and
across all regions other than Europe.
Total crop protection sales increased
by 14 per cent to $1.31 billion and
generated a similar increase in EBIT
to $110.1 million. Seed technology
sales in the period were up by 21 per
cent to $50.6 million and generated
a small loss of $0.2 million, which
was a significant improvement on
the $4.4 million loss recorded in this
segment in the first half of 2016.
Underlying gross profit margin was
29.1 per cent of sales, ahead of
the first half of the previous year
of 28.2 per cent. Underlying selling,
general and administrative expenses
were up slightly as a percentage of
sales (23.1 per cent v 22.9 per cent).
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