Nufarm expects better profit than last year

Agricultural chemicals supplier Nufarm Ltd says it expects operating profit in the first half of 2010/11 to be $10-20 million, as it says its first quarter earnings have been "well ahead" of the previous corresponding half.

Nufarm chief executive officer Doug Rathbone said the improved result was being driven by "stronger earnings in most of our markets and the absence of the negative impacts associated with glyphosate--1.htm">glyphosate related write-downs of last year".

"Our first quarter is generally in line with, or ahead of, expectations in Australia, Asia, North America and North Eastern Europe," Mr Rathbone told Nufarms annual general meeting.

"Brazil and Southern Europe are tracking behind forecast but we expect activity to pick up in Brazil now that growers have the conditions to accelerate planting activity," he said.

"On an overall basis, our first quarter (earnings) EBIT result is well ahead of where we were at the same point last year and gives us continued confidence that the business can generate an improved profit outcome over the course of the full year.

"For the current half year, we expect an improved operating result compared to the first six months of 2010 in which the company recorded a headline loss of $40 million and an operating loss of $4.5 million.

"For the six months to January 31, 2011, we expect to record an operating profit in the range of between $10 million and $20 million."

Mr Rathbone said the guidance relied on variables including trading conditions over the next two months, and climatic factors.

"We will be reporting a number of non-operating or material items at the half year," he said.

"These will include the one-off costs associated with... interim financing arrangements and the (companys) strategic review.

"The improved overall half year result will be driven by stronger earnings in most of our markets and the absence of the negative impacts associated with glyphosate--1.htm">glyphosate related write-downs of last year".

Net debt was anticipated to be lower at the half year than at that point in the prior year, Mr Rathbone told the meeting.

"It will, however, be higher than at the July 2010 levels as we build working capital to levels required for the key second half selling period."

Nufarm chairman Don McGauchie said the company would be more cautious in future with earnings guidance.

"The company has previously followed a practice of providing specific earnings guidance," Mr McGauchie told the meeting.

"We are now taking a more conservative and cautious approach in terms of our outlook statements.

"I believe this is an appropriate stance, given the experiences of the past 12 months and a recognition that there are unknown factors and variables that will influence our earnings, including future climatic conditions and competitive influences on pricing.

"As these conditions become clearer over the course of the year and particularly in the key second half selling period, we may be in a position to provide more complete guidance."