Nufarm shares set to tumble

Thursday 15th July 2010

Nufarm, the agricultural chemicals maker part-owned by Japan’s Sumitomo Chemical, may tumble when its shares trade today on the ASX after slashing its full-year guidance on weaker sales in North America, Europe and Australia.

The shares resume trading today after being halted for a trading update. Full-year operating profit is now expected to be A$55 million to A$65 million, down from previous guidance of A$110 million to A$130 million.

Shares of Nufarm, whose long-serving chairman and shareholder Kerry Hoggard retired this week due to ill health, have halved in value this year. They last traded at A$5.24, down from A$10.42 at the start of the year. Sumitomo paid A$14 a share for its 20% stake.

The shares are rated ‘hold’ based on 11 analyst recommendations compiled by Reuters. Shareholders paid A$5.75 a share for new stock in April, when the company raised A$250 million.

The latest downgrade marks the fourth in the past 12 months for the company whose flagship product is a glyphosphate weed killer. Nufarm blamed adverse weather conditions, particularly in North America and Europe, which sapped demand for crop protection products. In the Australian market, tough competition had hampered the company’s ability to raise prices much.

“Our previous guidance assumed at least average seasonal conditions in major markets and it is unusual to have those conditions turn against us to the extent they have,” said Doug Rathbone, managing director, in a statement.

While all companies in the sector had been affected, “we need to be concerned with the impact on Nufarm’s business and our ability to identify and react to changed market conditions as early as possible,” he said.

“We are now revisiting the systems we have in place to achieve that.”

New chairman Donald McGauchie went further, announcing a “comprehensive review” of Nufarm’s strategy.

“The business still has very good growth prospects but our challenge now is to achieve those targets from a lower base.”

The revised guidance will lift forecast net debt to A$450 million for the year ending July 31, from a previous estimate of $350 million.

Businesswire.co.nz

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