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North American crop protection sales
were down on the previous year at
$513.6 million (2013: $516.3 million).
In local currency, Nufarm’s US sales
were down by 10 per cent. Segment
EBIT fell sharply to $20.6 million,
compared to $42.2 million in the
An unusually cold and long winter
in the US negatively impacted both
the cropping and non-crop markets,
with fewer applications and higher
inventories generating strong price
competition. Sales into the burn-down
(pre-plant) segment were well below
average due to the shorter planting
window for growers.
Lower volume demand and more
efficient inventory management
resulted in reduced production
and lower overhead recoveries
at Nufarm’s major herbicide
manufacturing facility in Chicago.
Seasonal conditions prevented
Nufarm from capitalising on a stronger
and broader product position in the
turf and specialty segment, having
completed a distribution arrangement
for Valent’s portfolio of products in
January of this year.
Nufarm performed strongly in the US
industrial and vegetative management
segment, with both sales and EBIT
contribution ahead of the previous year.
Seasonal conditions in Canada were
generally average. Nufarm made
good progress in implementing its
differentiated strategy and launched
a number of new products that
received strong support from the
market. Both sales and margin
were up on the prior period.
The South American business
performed strongly, with regional sales
up by 54 per cent to $662.5 million
(2013: $431.4 million) and underlying
EBIT up by 76 per cent to $71.6 million
(2013: $40.6 million).
In general, weather and cropping
conditions in the region were average.
Some parts of central Brazil experienced
drier than normal weather which limited
fungicide applications, but favoured
the use of insecticides. Extremely cold
conditions in Chile negatively impacted
the important local fruit and vegetable
Nufarm’s sales in Brazil were up
on the previous year by more than
60 per cent in local currency and
helped the business gain market share.
Sales growth was driven by Nufarm’s
differentiated ‘Crucial’ glyphosate
formulation as well as the successful
introduction of a number of new
products. A different product mix,
that included significantly higher sales
of older insecticide products, resulted
in a slight fall in the average Brazilian
gross margin. However, good cost
control and the benefits of scale
resulted in EBITDA margin expansion.
In Argentina, the business performed
strongly with growth in the quickly
developing herbicide segment for
control of glyphosate resistant weeds.
Local currency sales grew by more
than 70 per cent.
Further investments were made
in strengthening the regional
organisation, with an additional
15 sales representatives added in Brazil
and a number of senior commercial
appointments in Argentina. A new
commercial manager was also
appointed to support Nufarm’s
expansion into Peru and a new
distribution arrangement was
finalised for the Uruguay market.
European sales were up by 19 per cent
to $555.5 million (2013: $468.3 million).
Underlying EBIT was in line with the
previous year ($56.4 million versus
$57.2 million). In local currency,
Nufarm’s branded sales were ahead
of the prior year, while revenues
generated from operations (third party
and industrial sales) were down. Total
gross margin was up on the previous
year when measured in euros, reflecting
a higher proportion of branded sales.
Most western European markets
experienced favourable weather
conditions which helped drive an
increase in cereal plantings and positive
demand for crop protection inputs.
Eastern Europe was affected by colder
weather patterns and dry conditions.
Nufarm experienced solid growth
in markets such as Spain, Germany
and Romania, with new product
introductions contributing to a
slight improvement in average
margins across the region.
A focus on working capital efficiencies
resulted in changes at the European
manufacturing units, with better
forecasting and supply chain
management allowing lower levels
of safety stock and a resulting
reduction in volume through-put.
Consequently, overhead recoveries
in these facilities were well down on
the previous year. The contribution
from the European manufacturing sites
was approximately €2 million lower
this year compared to the prior year.
Major product segments
Nufarm’s crop protection business
accounted for 94 per cent of group
revenues and grew sales by 16 per cent
to $2.48 billion. These sales generated
an average gross margin of 26 per cent.
Herbicide sales were $1.67 billion,
an increase of 13 per cent on the
previous year, and represented
67 per cent of total crop protection
revenues (2013: 69 per cent). Increased
sales in both South America and Europe
more than offset weather-related
demand weakness in Australia and
North America. Glyphosate margins
were slightly up compared to the
2013 year, mainly driven by a strong
performance from Nufarm’s ‘Crucial’
glyphosate formulation in Brazil.
BUSINESS REVIEW CONTINUED
12 | NUFARM LIMITED ANNUAL REPORT 2014
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