Nufarm crop protection sales rose 3% in FY2012

Nufarm's crop protection business, which accounts for 94% of group revenues, grew sales by 3.2% to Aus$2.06 billion in the fiscal year 2012 which ended July 31. The company's seed technologies business grew sales by 38.7% to Aus$121.0 million.

The company reported an underlying net profit after tax (NPAT) of Aus$115.4 million. This represents a 17% increase on the underlying net profit after tax of Aus$98.3 million generated in the previous year. Underlying earnings before interest and tax (EBIT) was Aus$206.0 million, an increase of 20% on the Aus$171.8 million recorded in the 2011 financial year. On a constant currency basis, revenues increased by almost 10%.

Regional sales

The Australian and New Zealand businesses generated Aus$701.0 million in segment sales, representing 34% of total crop protection revenues. Underlying EBIT increased from Aus$94.7 million in the 2011 financial year to Aus$106.0 million in 2012, with the majority of the improvement contributed by New Zealand and the Croplands spray machinery business. A solid first half performance was driven by higher value herbicide sales into the cotton and horticulture segments. Glyphosate margins experienced increased pressure with the high level of formulated Chinese imports, but there was solid demand for the company’s post emergent herbicide range, and the launch of a new 2,4-D formulation – Amicide Advance – was very successful.

Nufarm’s New Zealand business also generated higher sales and improved profitability on the previous year with the important pasture and horticulture markets performing solidly.  The company’s New Zealand based insecticide and fungicide manufacturing facility, which produces product for export to Nufarm’s global markets, contributed strongly in its first full year of operation.

North American crop protection sales increased by just over 12% to Aus$470.2 million. Measured in local currency, the increase in US sales was slightly higher. The region generated 23% of total crop protection revenues. After a positive and early start to the major cropping season in the US, conditions deteriorated significantly, with key agricultural regions experiencing the worst drought in many years.

The dry conditions negatively impacted the turf and ornamental segment, particularly opportunities for fungicide sales in the latter months of the financial year. Seasonal conditions in Canada were mixed, but increased cropping activity drove stronger demand for crop protection inputs after several years of flood-affected below average plantings.

South American crop protection sales increased slightly to Aus$332.6 million, but generated a much stronger underlying EBIT, Aus$17.5 million versus Aus$4.1 million in 2011. Regional sales comprised 16% of total crop protection revenues, the same proportion as in the previous year.  
 
Seasonal impacts in Brazil were mixed during the year, with drought conditions in the south of Brazil affecting demand in the first half of the period and dry conditions in the north east of the country negatively impacting some sales in that region in the latter months of the second half. Conditions in the important central cropping regions were positive, however, and supported a very large ‘safrinha’ corn crop.
 
Nufarm’s Brazilian business strengthened its positions in pasture and sugar cane and introduced new products into several segments, including vegetable crops. In local currency, Brazil sales were up by nearly 14% to R$488 million. Improved margins were driven by new product introductions and a more balanced portfolio.
 
Dry conditions in the north of Argentina affected summer cropping activity, however Nufarm generated increased sales and an improved margin. The business in Chile also performed well but a combination of seasonal impacts and increased competition in some segments resulted in Nufarm’s Colombian operations generating a result in line with the previous year.

European sales down slightly to Aus$431.1 million and represented 21% of total crop protection revenues. On a local currency basis, Nufarm sales were higher in Germany, France, Romania, Hungary and Ukraine and the company reinforced its strong position in the corn herbicide market. Nufarm’s European based phenoxy herbicide manufacturing facilities made a significant contribution to the regional result.

Outlook

Nufarm will continue to remain much focused on its strategic growth plans and will implement initiatives and make appropriate changes to support those plans. The Australian business is expected to perform approximately in line with 2012, given seasonal conditions are similar over the course of the year.
 
The North American business is expected to generate modest growth at an EBIT level, with the benefit of several new product launches not scheduled to impact regional results until the 2014 financial year. South America – and in particular, Brazil – is positioned for another year of strong growth and improved profit performance. Key drivers will be the very buoyant local market conditions, together with further diversification of Nufarm's portfolio. While there remains considerable uncertainty in relation to market conditions in Europe, the company is expecting some improvement in its regional performance as structural changes and a more focused management approach begin to yield benefits.