Nufarm slashes outlook by 15%

Tuesday 16th June 2009

Nufarm, the farm chemicals company whose products include Roundup weed killer, slashed its profit forecast after failing to meet sales targets.

The company expects operating profit to fall some 15% from the previous guidance of A$220 million, but can’t be certain until the end of July, it said in a statement. Sales in the US.and Australia, the company’s two largest glyphosphate markets, are substantially lower than last year, and price competition has weighed on margins, it said. Glyphosphate is the active ingredient in one of the world’s most popular weed killers.

“We have also seen an aggressive response from competitors in the glyphosphate business, cutting prices in an attempt to capture a reduced volume opportunity,” said managing director Doug Rathbone. “Trading over recent weeks has revealed that volumes are also going to be down and will not recover in the current season.”

Nufarm last month raised about A$300 million through an institutional placement at A$11.25 per share to reduce debt and strengthen its balance sheet. After the placement, its net debt is expected to be about A$550 million.

Growers in the US and Australia were applying weedkiller later in the season, with many electing to shift their focus to post-plant weed control from pre-plant control, Rathbone said.

Nufarm shares tumbled 8.4% to A$11.09 on the Australian stock exchange today, and have slumped some 34% this year. The stock is rated ‘outperform’ based on an average of 10 estimates collated by Reuters. There were three ‘buy’ ratings, four of ‘outperform,’ two of ‘hold’ and one of ‘underperform.’

The company separately extended the closing date for its current share purchase plan to June 23. It expects to issue 26.7 million ordinary shares with existing shareholders able to subscribe for up to A$15,000 worth of stock.

Businesswire.co.nz

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