Nufarm Limited · ASX:NUF
Nufarm — Investor Presentation (September 2019)
35 slides from Nufarm's investor presentation, Sep 30, 2019
Slide 1: FY19 results and sale of Nufarm South America
FY19 results and sale of Nufarm South America 30 September 2019
Slide 2: Disclaimer
Disclaimer General This presentation has been prepared by Nufarm Limited. The information contained in this presentation is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for ma
Slide 3: Resetting Nufarm
Resetting Nufarm 1 • Sale of South American crop protection and seed treatment operations in Brazil, Argentina, Colombia and Chile ("Nufarm South America") to Sumitomo Chemical Company ("Sumitomo") for $1,188 million Sale of Nufarm − represents c.12.3x FY19 Underlying EBITDA after adjusting for the
Slide 4: Sale of Nufarm South America
1 Sale of Nufarm South America Attractive value creation for Nufarm shareholders • Sale of Nufarm South America to Sumitomo for $1,188 million, on a cash and debt free basis, subject to a customary net working capital adjustment on completion • Nuseed assets excluded from sale Transaction summary •
Slide 5: Compelling value for shareholders
1 Compelling value for shareholders Provides upfront value for shareholders and enables the redeployment of capital to regions where stronger cash flows can be generated • Attractive valuation representing: Attractive − c.12.3x FY19 Underlying EBITDA after adjusting for the net costs associated with
Slide 6: The South American market has unique characteristics
2 The South American market has unique characteristics Whilst Nufarm South America has generated high revenue growth, margins are lower than other key markets, working capital intensity is high, financing and FX costs (and associated volatility) are high and free cash flow generation is low Sales ($
Slide 7: A simplified business with a diversified earnings base
2 A simplified business with a diversified earnings base A diversified earnings base supported by reduced currency exposure and lower financing costs FY19 gross profit contribution by region Reduced FX risk and interest costs Pre-transaction Post-transaction Seed ANZ 9% Seed ANZ • On a pro forma bas
Slide 8: Focused on cash generation and improving margins
3 Focused on cash generation and improving margins Significant opportunities to increase earnings and cash conversion in existing capital base Europe North America • Well balanced and high quality product portfolio with strong • Leading market position in US turf and ornamental ("T&O") market custom
Slide 9: Focused on cash generation and improving margins
3 Focused on cash generation and improving margins Significant opportunities to increase earnings and cash conversion in existing capital base Asia Pacific Seed Technologies • Longstanding number one market position in crop protection in • Growing share in canola, sunflower and sorghum in all Austra
Slide 10: Omega-3 canola
3 Omega-3 canola A significant “Beyond Yield” opportunity with a positive earnings contribution expected from FY21 First to market Intellectual property position strengthened 35,000 acres now being • Multiple additional patents granted in FY19 harvested • US federal court infringement against other
Slide 11: Strengthened Sumitomo relationship
3 Strengthened Sumitomo relationship Nufarm and Sumitomo to continue long term relationship as strategic partners with Sumitomo to remain a major shareholder • Master agreement renewed to 2025, with a mechanism to extend further • New agreement confirms Nufarm as preferred commercialisation partner
Slide 12: Strengthened balance sheet
4 Strengthened balance sheet Nufarm's Group net debt / EBITDA will fall from 3.0x in FY19 to 0.7x on a pro forma basis. Opportunities for capital management can also be explored Sources and Uses ($m) Ongoing structural improvement in cash generation Sources Cash proceeds from Transaction 1,188 Earni
Slide 13: FY19 Results
FY19 Results
Slide 14: 2019 Overview
2019 Overview Managing industry headwinds and strengthening the business 2019 HIGHLIGHTS Sales $Am 3,758 3,111 3,308 Reported • Safety as our top priority 2,737 2,791 NPAT $38m • Managed external headwinds pcp $16m loss FY15 FY16 FY17 FY18 FY19 • Progressed next phase of ANZ transformation Underlyin
Slide 15: Europe
Europe Strong demand for new products but supply disruptions constrained earnings Sales A$m 815 643 • Sales and earnings growth in flat market conditions with strong demand for 545 550 540 products from acquired portfolios • Earnings constrained by supply disruptions, dry winter conditions in centra
Slide 16: North America
North America Strong performance in difficult conditions Sales A$m 1,020 834 761 • Flooding in US south and Midwest, dry in western Canada. High channel 654 inventories resulted in aggressive industry pricing 589 • Strong 1H contribution in T&O and market share gains in crop protection products in 2
Slide 17: Australia and New Zealand
Australia and New Zealand Prioritisation of working capital reduction and performance improvement program Sales Extreme drought A$m 654 582 590 554 452 • Continued drought for large parts of east coast of Australia and late season on west coast FY15 FY16 FY17 FY18 FY19 • High channel inventories and
Slide 18: Asia
Asia Good performance in difficult conditions Sales A$m 190 166 171 155 149 • Sales and earnings growth despite drought conditions and low commodity prices in Indonesia. Strong customer support and new product launches grew modest earnings growth in the rest of the region • Full year contribution fr
Slide 19: Seed Technologies
Seed Technologies Growth despite mixed seasonal conditions Sales A$m c.$37m in 221 Nufarm South 186 America 160 169 144 • Increased sunflower sales in Europe and Latin America and strong sorghum sales in Latin and North America offset impact of lower canola sales in Australia due to drought conditio
Slide 20: Latin America
Latin America Growth in volumes and differentiated product sales offset margin pressure Sales A$m 1,058 885 822 707 741 • Increased soy plantings in Brazil and improved climatic conditions in Argentina FY15 FY16 FY17 FY18 FY19 • Volume and revenue growth across all key product groups Underlying EBIT
Slide 21: 2019 financial results
2019 financial results Full year contribution from European acquisitions and strong performance in North America, Seed Technologies and Asia drove earnings growth (A$ millions) FY19 FY18 Change • Revenue and earnings growth in all regions except ANZ Revenue 3,758 3,308 14% (flat earnings Latin Ameri
Slide 22: Net debt and financing costs
Net debt and financing costs Equity raising reduced debt and supported business during headwinds Net debt $Am 1,374 1,247 • Equity raising in 1H19 reduced net debt • Year end leverage 3.0x (net debt / EBITDA) • Debt reduced by further $97.5m post balance date through FY18 FY19 settlement of preferen
Slide 23: Net working capital
Net working capital Progress on working capital efficiency reflected in improved composition Net working capital composition A$m $1,481m $1,325m • Growth is in receivables 1,474 1,276 • Inventory balances in line with prior year despite sales growth - reflects benefit of temporary Australian manufac
Slide 24: Cash flow
Cash flow Improvement on prior year but significant opportunity for further improvement 420 (103) • Increase in working capital significantly reduced on prior (42) year (FY18: $287m outflow) (156) • Operating cashflow $186m A$m stronger than FY18 (174) 19 (40) 98 • Underlying free cash flow (excludi
Slide 25: Focus on cash generation
Focus on cash generation Increasing cash flow in the near term and driving longer term structural improvement FY20 cash generation drivers Earnings recovery • ANZ performance improvement program • European supply chain under Nufarm control Target return to Working capital efficiency ANWC / Sales • I
Slide 26: FY20 outlook
FY20 outlook Continued sales growth, cost savings benefits and improvements in supply chain to drive earnings growth in the businesses remaining after divestment • Average seasonal conditions for major selling periods in key markets, with the exception of Australia where continued drought conditions
Slide 27: Conclusion
Conclusion • The sale of Nufarm South America represents attractive upfront value for Nufarm shareholders • Nufarm will be a simplified business with a focus on cash flow generation and improved margins • There are significant opportunities to increase earnings and cash conversion in the existing ca
Slide 28: Appendix
Appendix
Slide 29: Nufarm South America – summary financials
Nufarm South America – summary financials A$m; July y/e1 FY17 FY18 FY19 Latin America segment Sales 822 885 1,058 Removal of countries not included in the Transaction (4) (4) (10) Addition of Seed Treatment sold in Latin America with the Transaction 10 23 37 Other adjustments (1) (2) (2) Underlying
Slide 30: Constant currency group results
Constant currency group results Stronger USD, Euro and GBP benefit results, offset by weaker BRL and ARS (A$ millions) Full year ended 31 July 2019 2019 2018 Constant Reported Constant Reported currency currency currency ¹ currency % Revenue 3757.6 3682.6 3307.8 11.3% Underlying SG&A expenses ² 755.
Slide 31: Non IFRS information reconciliation
Non IFRS information reconciliation 12 months ended 31 July 2019 12 months ended 31 July 2018 Material Material Underlying items Total Underlying items Total $000 $000 $000 $000 $000 $000 Revenue 3,757,590 - 3,757,590 3,307,847 - 3,307,847 Cost of sales (2,722,923) 21,386 (2,744,309) (2,344,413) - (
Slide 32: Non IFRS information reconciliation
Non IFRS information reconciliation Twelve months ended 31 July 2019 2018 $000 $000 Underlying EBIT 248,585 265,103 Material items impacting operating profit (50,770) (89,604) Operating profit 197,815 175,499 Underlying EBIT 248,585 265,103 add Depreciation and amortisation excluding material items
Slide 33: Reconciliation of underlying free cash flow
Reconciliation of underlying free cash flow Twelve months ended 31 July 2019 2018 $000 $000 Net operating cash flows 98,131 (88,169) Net operating cash (inflows)/outflows arising on material items 40,318 31,462 Net cash from operating activities excluding material items 138,449 (56,707) Net investin
Slide 34: Non IFRS disclosures and definitions
Non IFRS disclosures and definitions Term Definition Underlying NPAT Profit / (loss) for the period attributable to the equity holders of Nufarm Limited less material items Underlying EBIT Earnings before net finance costs, taxation and material items Underlying EBITDA Earnings before net finance co
Slide 35: Thank you
Grow a better tomorrow