Nufarm (NUF) shares sank 2.8% to $4.53 yesterday after credit rating agency Moody’s cut the company’s rating.
The ratings group pointed to Nufarm’s inventory build in South America straining the company’s balance sheet and the continuing dry conditions across much of Australia.
Both, the ratings group said, will continue to put pressure on Nufarm’s finances.
Nufarm has made working capital management a key priority as management boosts inventory levels to help to meet surging demand for agricultural chemicals in the faster-growing South American region, led by Brazil.
NUF 1Y – Moody’s lowers Nufarm to Ba3
Moody’s said yesterday morning that it had downgraded Nufarm’s corporate family rating to Ba3 from Ba2 and its rating on the company’s $US325 million ($346 million) senior unsecured notes to B1 from Ba3.
"The downgrade of Nufarm’s ratings reflects our expectation that operating conditions in Australia will remain challenging in the next 12-18 months and that working capital will continue to pressure credit metrics,” Moody’s analyst Saranga Ranasinghe said in a statement.
Two consecutive dry seasons in Australia and an elevated cost base have taken their toll on Nufarm’s earnings in recent years.
In March and April, the company announced a series of cost cuts and restructurings in Australia and NZ to try and lower its local operating costs over the next year to 18 months.
The moves included the closure of two Australian manufacturing plants and one facility in New Zealand, as well as up to 165 job cuts.
