Agricultural chemicals supplier Nufarm has slashed its outlook for the full fiscal year after booking a 53 per cent fall in first half profit.
Hot, dry conditions in Australia had reduced demand for crop protection products, and Nufarm was also hurt by foreign exchange losses.
“We are an ag (agricultural) business, and therefore we are exposed to seasonal and climatic conditions,” Nufarm managing director Doug Rathbone said during a market briefing on Wednesday.
“But from the crop protection demand perspective, the season in Australia has been exceptionally bad.”
Nufarm on Wednesday booked a 53.5 per cent fall in net profit to $8.4 million for the six months to January 31
Net profit was dragged back by $9.2 million of foreign exchange losses. In the prior corresponding period, Nufarm made a foreign exchange gain of $14.4 million.
Mr Rathbone said that in the first half of Nufarm’s fiscal year, the Australian market for crop protection products had been very tough as a result of hot, dry weather.
“We will not make up the lost ground from the first half and a poor start to the second half,” he said.
Consequently, Nufarm now expected to generate underlying earnings before interest and tax below that of the prior full fiscal year, within a range of between $180 million and $200 million.
Underlying net profit would be affected by foreign exchange losses and higher interest costs.
Underlying net profit was expected to be below last year’s and within a range of $80 million to $95 million.
Mr Rathbone said that in the first half, Nufarm had experienced improved business performance in key global regions.
He also said that the company’s seed technology business was positioned for very strong growth.
But the result for business in Australia reflected challenging conditions.
Unusually tough seasonal conditions in Australia had affected both summer cropping and the fallow spraying that would go on before the planting of the regular broadacre winter crop.
Mr Rathbone said Nufarm’s business in South America was strong, with high crop prices driving an increase in planted acres and resulting in strong demand for crop protection inputs.
There was very positive sentiment among farmers in the US despite last season’s drought.
Conditions in Europe, which was under snow at the moment, were mixed, but the outlook was very good.
Nufarm declared a steady interim dividend of three cents per share, fully franked.
Nufarm shares were placed in a trading halt before the release of the company’s half year results.
The results were published, and the trading halt was lifted, after the Australian share market had closed.
Shares in Nufarm last traded at $4.77.