Why the Nufarm (ASX:NUF) share price has rocketed today

The Nufarm Limited (ASX: NUF) share price has rocketed 7.69% this morning after the company released its FY20 results.

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The Nufarm Limited (ASX: NUF) share price has surged 7.69% to $4.48 in morning trade. This comes after the company released its FY20 results today.

This compares with the S&P/ASX200 Index (ASX: XJO) which is also up, 1.9% to 5,892 points.

Let's see how the Nufarm share price performed in its full-year for 2020.

How did Nufarm fare in FY20?

Nufarm reported mixed results for the financial year ending 31 July 2020. The crop protection and specialist seeds company delivered revenue of $2,847 million. This was a 7% uplift on FY19, underpinned by a strong second-half momentum across Australia, New Zealand (ANZ) and North America.

Nufarm's recorded a statutory net loss after tax of $362 million. This was attributed to weak seasonal conditions faced in the first 6 months and the effects of COVID-19.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) stood at $236 million, down 21%. Reduced earnings in Europe, seed technologies and North America for 1HY20 offset growth in ANZ and Asia.

The company's underlying net operating cash flow from continued operations increased by $137 million. This was primarily due to Nufarm's improved working capital management which more than covered the loss of incoming revenue.

Cash on hand was at $687 million with further undrawn facilities of $648 million should Nufarm need to access these funds.

The company has continued to suspend all dividends until further notice.  The board will revisit this decision in future based on the prevailing market conditions.

What did management say?

Nufarm CEO Greg Hunt acknowledged the difficult trading conditions. He said:

2020 has been an extraordinary year. The agricultural markets in which we operate across the globe have endured mixed seasonal conditions, industry-related supply issues and of course the tragedy and disruption of COVID- 19.

Mr Hunt said decisive steps had been taken to strengthen the business and improve returns. He added.

We have refocused our portfolio, strengthened our balance sheet and progressed key priorities to drive better performance from our continuing businesses. 

The successful completion of the sale of the South American businesses in April 2020 delivered up-front value for shareholders and has refocused our portfolio on the businesses and regions with higher margins and stronger cash flow.

The sale proceeds strengthened our financial position to allow us to better manage inherent industry volatility.

FY21 outlook for the Nufarm share price

Nufarm is working to improve cash generation and deliver an earnings recovery for its Europe operation. In addition, the company will look to continue the positive sales momentum in its North America and Asia Pacific regions.

The board is projecting net external costs to be in the range on $75–$85 million, excluding foreign exchange gains and losses.

Furthermore, depreciation and amortisation are predicted to be approximately $220 million, and capital expenditure at $180 million.

The company noted that this month, it had secured its first commercial sales and forward orders of its omega-3 canola oil to a major global salmon producer. This product is expected to yield significant value in the coming years.

The company will provide a trading update on 19 November and in its annual general meeting on 18 December.

The Nufarm share price is down by more than 27% from the beginning of the year. Today's result will offer some relief to shareholders as the Nufarm share price has not recovered anywhere near its highs above $9 since 2018.

Motley Fool contributor Aaron Teboneras 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.

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