The Nufarm Limited (ASX: NUF) share price is on the move today after the company announced it has received regulatory clearance for the sale of Nufarm Brazil and confirmed guidance.
After opening nearly 3% lower, Nufarm shares are now 0.90% higher for the day while the S&P/ASX 200 Index (INDEXASX: XJO) is down by 1.60%.
Details of the sale of Nufarm Brazil
This morning, Nufarm informed the market it has been given the go-ahead for the sale of Nufarm Brazil to Sumitomo. With this, clearance for the sale has been provided by the General-Superintendent of the Administrative Council of Economic Defence (CADE) in Brazil.
There will be a mandatory 15-day waiting period. If there are no objections from CADE's Administrative Tribunal, then the completion of the sale is expected to occur on 1 April 2020.
As previously announced, the gross purchase price of the sale is $1.188 billion. This price will be adjusted to reflect working capital and net debt balances as at 31 March 2020. Nufarm added that the net proceeds it receives will be used to pay down existing debt facilities.
Nufarm noted that the South American businesses are expected to record a loss before interest, tax, depreciation and amortisation of approximately $10 million in the second half of the financial year up until 1 April 2020.
FY20 earnings guidance and update
According to today's release, the completion of the sale will have a favourable impact on Nufarm's financing costs and depreciation and amortisation costs.
Nufarm confirmed previous earnings guidance for first-half FY20 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $55 million to $65 million.
Assuming completion of the sale of the South American businesses on 1 April 2020, Nufarm now expects to report interest costs of approximately $90 million to $100 million for FY20.
Additionally, the company now expects to report net foreign exchange costs of approximately $12 million for the first half of FY20. However, around $7 million of these losses relate to the South American crop protection businesses being divested.
Depreciation and amortisation is expected to be approximately $220 million for FY20, assuming no significant movement in current exchange rates.
Nufarm also noted that it now expects its underlying effective tax rate to increase as a consequence of the sale of its South American businesses. In addition, Nufarm expects to report material items of approximately $35 million for the first half of FY20.
