The management of crop protection company Nufarm has excluded items worth almost $400 million from the non-statutory calculation for underlying net profit after tax since 2011.
In each year, a different item or set of items is singled out for exclusion from the firm's statutory results.
And in each year the underlying net profit after tax (NPAT) is a more positive number than the statutory figure.
The items have ranged from impairment losses and the settlement costs of a shareholder class action through to three consecutive annual exclusions relating to "one-off" restructure and asset rationalisation programs worth more than $200m.
The most dramatic difference between underlying and statutory results was in 2011, when a statutory net loss of $50m became an underlying net profit of $98m after the exclusion of almost $150m of material items such as impairment losses of $70m at the firm's Brazilian business, debt refinancing costs of more than $17m, and other legal and consultancy costs.
The headline in the company's preliminary results statement of that year was simply: "Nufarm reports strong recovery in underlying performance."
In 2012, material items excluded from underlying profit after tax included "an after tax impact of $30.5m associated with the proposed settlement of a shareholder class action".
This turned a $73m net profit after tax into an $115m underlying net profit after tax.
In 2014, the first of "one-off costs" associated with the "restructure and asset rationalisation" operations were excluded from underlying earnings.
The 2015-16 financial year saw a statutory net profit of $28m become an underlying net profit of $109m, an almost fourfold increase, after the exclusion (for the third time in a row) of "one-off costs".
This time it was for $81m "associated with restructuring initiatives and asset rationalisation".
The headline in that year's preliminary announcement: "Strong underlying EBIT (earnings before income and tax) growth driven by higher margins and excellent progress on improvement program."
In a statement, the general manager of Nufarm investor relations, Mark Keating, said the firm's reporting was "in compliance with accounting standards".
"We are obligated by accounting standards to identify material items separately in our financial statements," Mr Keating said.
"Then we follow non-GAAP [generally accepted accounting principles] measure guidance as outlined by regulators."
He said Nufarm gave "equal prominence to both reported/statutory and underlying numbers, including a reconciliation between the two".
The firm's 2016 annual report lists the statutory and non-statutory figures on page 6 of its annual report, and note 6 on page 66 details the material items.
A reconciliation between NPAT tax and underlying NPAT is detailed in the results presentation, but not in the annual report.
"The disclosure of underlying profit gives investors a view of the ongoing performance of the group," Mr Keating said.
"The general running of the performance improvement program is now deemed operating.
However, when decisions result from the program such as shutting down manufacturing facilities, and these are financially material, then we are obligated to disclose separately."
The firm's performance improvement program "will ultimately lead to a more efficient operation and improved returns for shareholders", he said.
- This story first appeared in The Australian Financial Review
