Agricultural chemicals supplier Nufarm says it is well placed to grow operating profit this year as it diversifies its product range away from the weedkiller glyphosate.
Nufarm also said that the general outlook for the agricultural sector was positive, and, given favourable weather, cropping activity in Nufarm’s major markets should be strong.
Nufarm on Wednesday reported an full year net loss of $49.8 million for the year ended July 31, 2011, compared to a net loss of $23.9 million in the prior year.
The result included a $148 million negative impact from material items, including an impairment charge of $70 million on the goodwill of Nufarm’s assets in Brazil.
Operating profit, which excludes material items, rose 68 per cent to $98.28 million, from $58.6 million in the prior year.
“With increased certainty relating to its financing position, a strong focus on business improvement initiatives, and further momentum behind the company’s product diversification strategy, Nufarm is well placed to achieve operating profit growth in the 2012 financial year,” Nufarm said in a statement.
Nufarm said it would continue to diversify into more profitable areas in 2012, including non-glyphosate products and products available through its strategic relationship with Japan’s Sumitomo Chemical Company, which holds a 23 per cent stake in Nufarm.
The glyphosate segment was forecast to remain very competitive and margins on glyphosate sales were expected to be in line with 2011.
Nufarm managing director Doug Rathbone said the 2011 operating results represented a significant improvement on the prior year as the company lessened its dependence on less profitable glyphosate sales.
“It demonstrates that this business is back on the road to sustainable profit growth,” Mr Rathbone said in a market briefing.
Revenue fell four per cent to $2.08 billion, with sales of glyphosate down 30 per cent but sales of other products up by six per cent.
Glyphosate sales represented 20 per cent of total revenue, down from 28 per cent in 2010 and 40 per cent in 2008.
The company also reduced its net debt to $465 million in fiscal 2011, down from $619 million at July 31, 2010.
Nufarm said that in fiscal 2011, its business in Australia experienced generally positive climatic conditions but not so in key northern hemisphere markets.
Insecticide sales lifted 24 per cent, fungicide sales grew 18 per cent and sales of non-glyphosate herbicides increased marginally.
Seed and seed treatment sales surged 57 per cent, boosted by businesses acquired during fiscal 2010.
Mr Rathbone said the seeds business was emerging as an important contributor to earnings and would be a valuable focus for future growth.
Nufarm said the Brazil operations had incurred losses in recent years and had not met internal financial targets due to market, product and economic factors.
But earnings from the Brazil operations had improved substantially in 2011 relative to the prior year as a result of new management, restructuring and product diversification.
“It gives us a great deal of confidence about the outlook for profit growth in Brazil,” Mr Rathbone said.
Mr Rathbone said that despite the impairment charge on the Brazil assets, Brazil was expected to build positively on its 2011 results.
Shares in Nufarm gained nine cents, or 2.1 per cent, to $4.32.
