Agricultural chemicals and seeds supplier Nufarm is banking on spring rains to help boost its profits.
Rain boosts demand for Nufarm’s crop protection products, which include weed, insect and fungus killers.
Nufarm also expects that a reorganisation of its Australian operations, which began in March and aims to lift profits and cut costs, will produce benefits in fiscal 2015.
“The outlook for the 2015 financial year is spring and summer rainfall plus initial benefits from the restructuring will drive earnings recovery in Australia,” Nufarm managing director Doug Rathbone said on Tuesday.
Nufarm’s business in Australia in fiscal 2014 generated flat sales and lower underlying earnings due to dry conditions and tough competition.
Mr Rathbone cautioned that in Australia nothing was ever perfect in farming.
In some parts of Australia now, marginal crops were being cut for hay, but other crops looked terrific.
“We need a bit more rain in the north. Most of the crop areas in Australia would like a little bit more rain before December so they can finish the crop off nicely,” he said.
“It’s varied, but we’ve got a better year on our hands now than we’ve had for the last two.”
Nufarm on Tuesday unveiled a 53 per cent fall in full year profit to $37.7 million for the year to July 31.
The result was weighed down by hefty costs from restructuring its Australian and New Zealand businesses.
But excluding those costs, underlying net profit rose four per cent to $86.4 million.
Nufarm said dry conditions in Australia and a long winter in the United States had reduced demand for its products and put pressure on margins.
But Nufarm’s South American business performed well, especially in Brazil where a strong infestation of pests on major crops generated very high demand for insecticides, and Argentina.
Increased sales in South America and Europe more than offset weather-related demand weakness in Australia and North America.
Mr Rathbone said business in Asia was flat and required more investment.
Nufarm’s seed technology platform was strong, especially in canola.
Nufarm’s head of commercial operations, Greg Hunt, said Nufarm was under-represented in Asia and had opportunities there.
“Asia is Nufarm’s smallest regional business but represents a growth region for crop protection inputs,” Mr Hunt said.
“Our objective is to broaden our portfolio so that we are able to target the rice and vegetable segments and to strengthen out position in plantation crops.”
Shares in Nufarm were 49 cents, or 12.16 per cent, higher at $4.52 at 1502 AEST.
Lonsec senior client adviser Michael Heffernan said Nufarm had been belted over the last couple of years for its disappointing performance.
But the results released today had been better than expected and the restructuring was pointing towards further improvement.
- Company Earnings