Shares in agricultural chemicals supplier Nufarm jumped more than 5% yesterday on an optimistic outlook given to shareholders at the AGM.
That was after Nufarm chairman Donald McGauchie told shareholders that the company saw a chance to grab something from the current mergers and acquisition binge gripping the sector.
Five of the top six global crop protection firms are now involved in merger and acquisition processes – involving giants such as Monsanto and Bayer; Dow and Dupont: and Chem China with Sygenta. To get clearance some of these matings were going to have to sell off assets to smaller rivals to maintain competition and Nufarm obviously sees a chance to grow.
"All of these deals are still in the regulatory approval process in key global markets. However, we expect products or portfolios to be divested as these deals progress. This could provide opportunities for Nufarm if we see strategic opportunities that complement our portfolio, fit with our strategy, and are commercially sound,“Mr McGauchie said.
And Nufarm managing director Greg Hunt repeated those sentiments to the media after the AGM saying while it was early days with the potential merger deals still in their early stages, there could be opportunities next year and the year after.
"There’s a lot of speculation, but we would expect to see across the whole portfolio herbicides, pesticides and fungicides products being divested," Mr Hunt said. "But in terms of who and what size and what timing, it’s just too early."
And Mr Hunt was confident that earnings for the first half of the 2016-17 would be ahead of the prior year.
"Our first half year result is typically dominated by contributions from Australia and Brazil, which are both experiencing competitive market conditions. What is pleasing this year is that we are seeing an improved contribution from our North American business,“ Mr Hunt said.
"As a result of this, we are confident that underlying EBIT at the end of January will be ahead of the prior year. This will leave us well placed to deliver solid underlying EBIT growth for the full year.”
In Australia, in the first quarter, seasonal conditions were better than those experienced for some years because of above-average rainfall. The outlook for summer cropping remains favourable, and the outlook for winter cropping in 2017 is also positive.
The North American business had stated the year very well, and a successful sales campaign in the turf and specialty sector would contribute to a better first-half contribution The Brazil market is expected to be down in US dollar terms for the 2016 calendar year, but increased crop plantings and recent product launches are expected to deliver a solid first-half performance from Latin America.
Year-to-date sales in Europe were in line with the previous period, but the European business was positioned for another year of growth in the wake of a focus on high-value products, cost cuts and new product launches.
The shares ended at $9.03, up 5.7% on the day.
