Ann: FORECAST: NFF: Nufarm completes portfolio and manufacturing review

• Release Date: 23/02/16 12:07
• Summary: FORECAST: NFF: Nufarm completes portfolio and manufacturing review
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					NFF
23/02/2016 12:07
FORECAST
PRICE SENSITIVE
REL: 1207 HRS Nufarm Finance (NZ) Limited

FORECAST: NFF: Nufarm completes portfolio and manufacturing review

COMPANY ANNOUNCEMENT
23 February, 2016

Nufarm completes portfolio and manufacturing review

o One-off restructuring costs of between $115 - $125 million ($86 million
non-cash) to be booked at the half year.  The net profit after tax impact of
the material items is estimated to be between $95-105 million.
o Nufarm's underlying half-year EBIT is expected to increase between 8-13% on
the prior half-year.
o Underlying profit after tax at the half year will be approximately $15
million lower than the prior period, largely as a consequence of net foreign
exchange losses.
o Nufarm performance improvement program on track.

Performance improvement program - material items

Nufarm Limited today announced the completion of reviews of the manufacturing
footprint and product portfolio.  The performance improvement program is on
track and management remains committed to delivering performance improvement
benefits of at least $116 million by full year 2018.

Nufarm is developing a product portfolio that better meets the needs of
customers in select crops and key markets, where stronger margins could be
expected.

As a result of the review, the product portfolio has been streamlined, with
annualised benefits of up to $10 million expected from reduced registrations,
packaging and warehousing costs, lower working capital and a focus on higher
margin products.  The streamlining of the portfolio results in a number of
lower margin and non-strategic products being discontinued, and will result
in a one-off write down of $80-90 million on the asset values related to
those products.  This is a non-cash adjustment that will be reflected as a
material item in the half-year results.

Concurrently, a reassessment of the useful life of the remaining product
related intangible assets has also been completed.  In light of wider
industry practice and asset specific factors, the company has reassessed that
the useful life of all product related intangible assets now does not exceed
30 years.

As many of these product related intangible assets were previously deemed to
have an indefinite useful life, the change in accounting estimate effective
from 1 February 2016 is projected to result in higher amortisation costs (non
cash) of approximately $7 million in the current year and an increase of
between $13 million to $16 million on an annualised basis.

The manufacturing footprint review, which is now completed, has already led
to changes.  In November 2015, it was announced that the Calgary plant in
Canada will be closed, with one-off costs of $9.5 million ($3.7 million
non-cash) to be booked in the first half of the current year.

In the half-year accounts, the Company will also have $17 million of costs
related to manufacturing efficiency initiatives and $9 million in other
associated restructuring costs.

The streamlining of manufacturing, procurement and supply chain operations
will enable the company to take advantage of global scale; remove
inefficiencies; and improve performance, with a particular focus on better
serving Nufarm's customers.

Updated Guidance

Underlying EBIT at the half-year is expected to be 8-13% ahead of the prior
half-year, off the back of strong trading performance in January.  This is an
upwards revision of the guidance provided at the AGM in December when the
company projected underlying first half EBIT to be in line with or ahead of
the prior year.

The Company stated at the AGM that the underlying profit after tax at the
half year would be lower than the prior year.  Largely as a consequence of
net foreign exchange losses, underlying profit after tax will be
approximately $15 million dollars lower than the prior period. The
significant volatility in exchange rates has continued to put pressure on
Nufarm's foreign currency exposures. Over the half year, the company incurred
net foreign exchange losses and hedging costs of $18 million, mainly due to
the extreme volatility of the currencies in South America and the high cost
of hedging those exposures.  The exchange losses will be included in the net
financing expense in the income statement at the half year.

Nufarm's results for the first six months are typically dominated by
contributions from Australia and Brazil, which both experienced challenging
market conditions during that period.  Despite this, Nufarm has delivered
margin expansion and EBIT growth.

This growth - combined with the benefits associated with the company's
performance improvement program - will result in underlying EBIT at the half
being ahead of the prior period by between 8 -13%, as reported in Australian
dollars.

The company's continued focus on working capital efficiencies has meant the
average net working capital to sales ratio at January 31 will be lower than
at the same time last year and also lower than at 31 July 2015.

At the full year, the company is forecasting underlying EBIT growth on the
prior year and expects to deliver at least $20 million of benefits from the
performance improvement program.

Confirmation and further details of the half year results will be provided on
23 March 2016 as previously scheduled, on the completion of the audit review.

The company's focus in 2016 continues to be:
o Delivering on cost savings
o Reducing complexity in the business
o Driving margin expansion; and
o Delivering on the working capital target of 40% (average net working
capital to sales).

-- end --

Further information: Mark Keating
   GM Investor Relations
   [email protected]
   * (61 3) 9282 1004

Rachel Eaves
   GM Corporate Communications
   [email protected]
   * (61 3) 9282 1218
End CA:00278159 For:NFF    Type:FORECAST   Time:2016-02-23 12:07:28