FY20 result: Nufarm (ASX:NUF) reports $456 million loss

Nufarm Limited (ASX: NUF) has reported its FY20 result this morning.

It’s an agricultural chemical company with over 2,100 products across 100 countries.

Nufarm’s FY20 report

The company sold its South American businesses in April 2020, so that’s why the below numbers are the remaining ‘continuing’ businesses.

Nufarm announced that its continuing revenue increased by 7% to $2.85 billion with improved seasonal conditions in the second half in Australia, Indonesia, the United States and Canada. The breaking of the drought in Australia really helped.

However, there were hot, dry conditions in northern and eastern Europe, with weak demand in the fourth quarter.

Nufarm said there is improved product availability for Europe with fourth quarter indications of easting raw material costs to benefit FY21.

The continuing underlying EBITDA dropped by 21% to $236 million because of weaker earnings in the North American business in the first half and a decline in European and Seed Technologies earnings.

Underlying operating cash rose by $137 million to $217 million.

The company reported a continuing statutory net profit after tax (NPAT) of $362 million.

There were a number of material items affecting the FY20 report. There was $50.5 million of restructuring costs, $9.9 million of Nuseed legal fees, an $188.3 million impairment of the carrying value of European assets and a $33.1 million tax loss write-off (and other tax effects).

Including the discontinued operations, it saw underlying EBITDA fall 30% to $295 million and it reported a statutory loss of $456 million.

The Nufarm board decided to continue to suspend dividends.

FY21 outlook

In Europe Nufarm is going to continue work on its performance improvement program. The next phase will focus on ‘right-sizing’ its support functions, supply chain and logistics with an annual total cost savings of $20 million to $25 million by the end of FY22.

It’s working on improving its conversion costs with increased waste water treatment and energy costs at Wyke. There will also be an improved energy contract from 2021 and debottlenecking opportunities to improve unit costs.

Raw material costs remain elevated in FY20. The reopening of the Chinese economy in March 2020 after the COVID-19 lockdown has increased supply.

The company is continuing to improve its cash generation. There has been “good revenue growth” from continuing businesses in August.

Nufarm is an interesting business and because it’s cyclical there are opportunities to buy it at lower prices. However, there are plenty of other ASX growth shares I would rather buy today like Pushpay Holdings Ltd (ASX: PPH) and Bubs Australia Ltd (ASX: BUB).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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