Nufarm's buyback signals asset growth

Friday 11th May 2001

By Nicholas Bryant

A share buyback and expansion into the US by diversified chemicals group Nufarm is expected to lift the company's sagging share price - in the short term at least.

With its shares languishing close to three-year lows, Nufarm announced in late September it intended to buy back up to 5% or 7.7 million shares over the next six months - an average of 64,000 shares a day on both sides of the Tasman, if the 5% limit were reached.

But by the end of March no buyback had occurred, the move held off while the company attempted a takeover of agri-business company IAMA.

The takeover foundered when IAMA shareholders approved a merger with Wesfarmers Dalgety and Nufarm decided to exit its 19.1% IAMA holding.

Then in April the buyback was re-announced, but was almost immediately halted again because ASX rules do not allow a company to buy back shares while in the latter stages of deals that might significantly change its value.

This week Nufarm announced just such a deal, the purchase of US-based Agtrol International fungicides business, with $US50 million annual sales, from Philipp Brothers Chemicals.

The price has not been disclosed but Mr Reis said the company had paid less than 10 times earnings before interest and tax.

The acquisition will get Nufarm into the lucrative $US6 billion fungicide products market, the fastest growing sector of the global crop protection business.

Agtrol is a global leader in the development and marketing of copper fungicides used to prevent fungal disease in a wide variety of crops.

And the share buyback may soon be under threat again, as Mr Reis hinted more deals were in the wind.

"A board meeting on Friday will assess whether we are at a stage in any other negotiations on any other opportunities that would preclude us from being able to participate in the buy-back," he said.

Nufarm, formerly called Fernz, moved its main stock exchange listing to Australia in late 1999 because about 45% of its revenue was generated there and only 10% here.

Share price-wise, the move has not been successful, as before the shift Nufarm was trading at $6.10 on the NZSE.

It is now at about $3.60 despite performing creditably.

The decline has been attributed to many shareholders (the bulk of Nufarm shareholders being domiciled in New Zealand) selling out when the company moved its main listing to Australia, and also a slowness in Australian investors in recognising the worth of the company.

Mr Reis said a recent road show targeting institutional investors had been successful with six more Australian broking houses having invested in the stock, while all brokers had "buy" ratings for Nufarm and considered the shares "massively undervalued."

Comments from our readers

No comments yet