Nufarm results hit by Australia’s scorching summer

Nufarm results hit by Australia's scorching summer

Challenging seasonal conditions have offset improvements in other business areas.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published September 25, 2013 1:33 pm AEST

Farming products company Nufarm (ASX: NUF) fell victim to last summer's hot weather, as exceptionally weak demand in Australia mitigated strong overseas performance. The group reported a net profit, excluding material items, of $83 million for financial year 2013, down 28% on the prior year.

With its largest market, Australia, seeing record-breaking temperatures this year, the group relied upon its geographical diversification to support results. In financial year 2013, 74% of revenues came from outside Australia and New Zealand. The downside was foreign exchange losses of $10.7 million in 2013, compared to gains of $8.2 million in 2012.

South America saw the group's strongest growth and it has reported recorded sales levels in Brazil through August and September. An overall trend of improving performance in the Americas and Europe has supported the share price in recent times.

The group anticipates a rebound in the Australian market and confirmed it expects to see underlying earnings growth in 2014. A final dividend of five cents per share was declared. The full-year dividend of eight cents per share is up 33% on the prior year.

Foolish takeaway

Population growth and increased demand for agricultural services are two obvious themes Foolish investors should look to take advantage of. This year's results demonstrate the cyclical nature of agricultural markets and their impact on businesses like Nufarm. The investment fundamental of expanding agricultural demand remains a strong one though, and if management can successfully leverage this, the company has potential for growth.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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