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Nufarm beats own first-half forecast

Tuesday 27th March 2012

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Nufarm, the agricultural chemicals company, said first-half net profit excluding one-off costs rose 5.3%, beating its December forecast.Net profit for the six months ended Jan. 31, excluding costs, rose 5.3 percent to A$23.9 million.

In December, managing director Doug Rathbone said the first-half result should be “broadly in line” with the previous first half.

Including one-off costs, mostly financing costs, net profit more than quadrupled to A$18 million compared with the year-earlier first-half profit of A$4.4 million.

Rathbone said the latest results demonstrated continued improvement in earnings and discipline around capital management.

“While a global agricultural business will always be subject to seasonal and business swings, we are building a much stronger base from which we can secure profitable growth well into the future,” he said.

Highlights included the strong performance of Nufarm's Australian and Brazilian operations where positive seasonal conditions drove strong demand for crop protection products, he said.

Consistent and widespread rain helped the Australian operations whose input costs were lower because of the relatively high Australian dollar.

The New Zealand operations also contributed higher sales and profit, reflecting generally positive business and seasonal conditions, Rathbone said.

However, the European business was tracking behind budget and faces “some challenges” in the current six months.

“Seasonal conditions in Europe are very mixed and there is increased business risk associated with economic pressures in a number of European countries. We will step away from business in those markets where we judge those risks to be unacceptable,” he said.

But any downside in Europe will be balanced by average or generally positive seasonal and trading conditions in most other regions.

“Australia is well-placed to see large winter cereal crop plantings, given the best subsoil moisture profiles we have seen across many cropping regions in a number of years,” Rathbone said.

Very strong planting forecasts for the US and a relatively early spring should help the business. While the major season in Brazil is over, “we are seeing continued sales activity in South America which is very encouraging.”

Nufarm will pay a fully franked dividend of 3 cents per share, its first dividend payout since the 15 cents per share it paid in November 2009.Nufarm shares closed yesterday at A$5.10 on the ASX, down from their recent high at A$5.24 but well up from A$3.08 in August last year.

Nufarm's NZX listed perpetual, subordinated, unsecured, redeemable exchangeable notes last traded on March 22 at $101 per $100 face value, down from $104.50 late last year.


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