Nufarm shares skyrocket 34% as $1.18b sales agreement is announced

Though Nufarm announced that it would not pay a dividend in FY19, the company revealed good revenue and earnings (EBITDA) growth when it released its full-year results today.

During the morning session the Nufarm (ASX: NUF) share price soared as much as 34%, following the release of solid FY19 results and the announcement of plans to sell its Nufarm South America business for A$1.18 billion.

By the afternoon session, bullish action around the stock had moderated somewhat, with the Nufarm share price trading around the A$5.60 mark.

Some market commentators have suggested that a ‘short squeeze’ was a likely contributor to today’s bullish price action; given that around 17% of Nufarm’s stock was held short prior to today’s announcement.

Nufarm share price: 2019 results in focus

On the top-line, Nufarm (ASX: NUF) posted FY19 revenue of A$3,758 million – up 14% from the year prior. With the company noting that it saw revenue growth in all regions, bar Australia and New Zealand.

On the bottom-line, company earnings (EBITDA) also got a modest boost – rising 9% to A$420 million.

As the company pointed out, this was ‘driven by a full year contribution from the European portfolio acquisitions and growth in the North America, Seed Technologies and Asia business segments.’

Overall however, Nufarm’s NPAT came in 9% lower than it did in 2018.

Even so, the company has seen its balance sheet strengthened as a result of the equity raise it completed earlier this year; with the company reducing its net debt 9% to A$1,247 million.

Nufarm additionally noted that it has suspended its FY19 dividend ‘while the company focuses on deleveraging the balance sheet.’

Nufarm South American sale

Financial performance aside, the headline news of today's FY19 results relates to the proposed sale of Nufarm South America’s crop protection and seed treatment businesses, to Sumitomo Chemical Company, for a sum of A$1,188 million.

As part of the proposed sale, the companies 'will enter into a two year supply agreement and transitional services agreement under which Nufarm will provide procurement services and continued supply of certain productions to the South American businesses.’

Though the sale has been unanimously recommended by the Board, the company noted that shareholder approval is still required for the sale to be finalised, 'under Chapter 10 of the ASX Listing Rules, regulatory approvals and satisfaction of other conditions precedent.’

Nufarm is aiming to have the transaction completed by the first-half of the 2020 fiscal year.

Even with today’s sharp upwards price action Nufarm’s (ASX: NUF) share price has traded mostly flat for the year, rising just 4% since January.


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