Nufarm shares steadied yesterday in the wake of Friday’s slide on a more definitive profit downgrade for the six months to January 31.
The agricultural chemical manufacturer said on Friday that it expects first-half FY20 EBITDA to be in a range of between $55-65 million, firming up its prior guidance of “significantly lower than the prior corresponding period” of $121 million.
The news sent its shares tumbling 10% at one stage on Friday. Yesterday they edged 0.3% higher to $5.50 on some bottom fishing by investors looking for some sort of rally after weekend rain across parts of drought-hit Eastern Australia.
Nufarm will report actual first-half financial results for the January half-year on March 25. The downgrade came after a generalised profit warning last November.
The major problem is the company’s heartland business – Australia and NZ.
“In Australia, we have experienced a significant reduction in sales due to a continuation of extreme climatic conditions,” the company said last Friday.
“The impact of this has been partially offset by savings from the performance improvement program commenced last year.
“While there is some potential for increased sales in the remainder of the first half of the financial year due to recent and forecast rainfall, it is expected the Australia and New Zealand segment will record a loss before interest, tax, depreciation and amortisation for the first half,’ directors warned.
Friday’s statement also confirmed Nufarm is facing pricing and profit pressures in its North and South American operations and in Europe.
In the wake of the update, Macquarie Research yesterday downgraded the stock to neutral. It’s also trimmed its price target to $5.77.
It said the decision reflects “limited total shareholder return” and “potential for ongoing challenging conditions in the second half given competitive end markets and constrained raw materials supply / elevated cost of goods sold”.
