Nufarm share price charges higher on FY 2020 guidance

The Nufarm Limited (ASX:NUF) share price is on the move today after announcing impairment charges and its earnings guidance for FY 2020…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Nufarm Limited (ASX: NUF) share price is charging higher in morning trade.

At the time of writing the agricultural chemical company's shares are up 4% to $4.07.

What did Nufarm announce?

This morning Nufarm announced a non-cash asset impairment and revealed its unaudited FY 2020 earnings estimate.

According to the release, the company expects to recognise non-cash, impairment charges in relation to its European assets of approximately $215 million in FY 2020.

This comprises a pre-tax impairment of intangible assets of approximately $190 million and a derecognition of tax assets of approximately $25 million.

Management advised that the assessment of the carrying value takes into account recent operating performance and a moderated outlook of future earnings. The latter is based on an expectation of continuing margin pressure in its base product portfolio due to higher manufacturing costs and increased competition.

And while there are early indications that raw material costs for products in the portfolios Nufarm acquired in 2018 are easing, it notes that input costs for a small number of products are expected to remain elevated in the medium term. This has also been reflected in the carrying value assessment.

While this is disappointing, Nufarm's CEO, Greg Hunt, appears confident it is onwards and upwards from here for the European business.

He commented: "We believe the European business has reached an earnings trough in FY20, however it is appropriate to take this step to revise the carrying value of the assets. We have a comprehensive improvement program underway in Europe to grow revenues, reduce our cost to serve and lift margins."

"We expect this program, combined with an anticipated easing in raw material costs and improved weather conditions would be the major drivers of improved profitability in the European business in FY21," he concluded.

FY 2020 earnings estimates.

Based on its preliminary and unaudited accounts, Nufarm expects underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $290 million to $300 million in FY 2020.

Though, following the sale of the South American businesses, underlying EBITDA from continuing operations is expected to be in the range of $230 million to $240 million. This compares to EBITDA of $420 million in FY 2019.

Mr Hunt commented: "We have delivered positive momentum across most regions in the second half of the financial year, however earnings for the full year will be down on last year, primarily due to the divestment of the South American businesses, lower earnings in the first half and reduced earnings in Europe."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.
Share Gainers

Why Avita Medical, GenusPlus, Mesoblast, and Polynovo shares are storming higher

These shares are having a better day than most today. But why?

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why EOS, News Corp, Polynovo, and Pro Medicus shares are roaring higher today

These shares are starting the week positively. But why?

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Share Gainers

5 ASX 200 stocks marching higher this week even as the market sinks

These five ASX 200 companies are shrugging off the broader selling to march higher this week.

Read more »

Rising share price chart.
Share Gainers

Why Novonix, HMC, Karoon Energy, and Ventia shares are pushing higher

These shares are ending the week on a positive note. But why?

Read more »

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

3 top ASX 200 stocks I wish I'd owned in 2024

These three top ASX 200 stocks are racing higher in 2024.

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why Champion Iron, EBR Systems, Mesoblast, and Patriot Battery Metals shares are surging today

These shares are avoiding the market selloff on Thursday. But why?

Read more »

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors ended up snatching defeat from the jaws of victory today.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Clarity, Omni Bridgeway, Santana Minerals, and Vulcan shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »