Nufarm shares have hit a two-year low after the agricultural chemicals supplier warned of a steep drop in full-year earnings, blaming a lack of autumn rain across the country for a poor winter growing season.
Nufarm says extended dry conditions have “significantly impacted” its local business, with earnings before interest and tax from the Australia-New Zealand unit expected to drop as much as 90 per cent to between $5 million and $10 million from $51.6 million a year earlier.
The company says total underlying earnings for the 12 months to July 31 will be between $255 million and $270 million, down from $302.3 million a year earlier.
Australia is experiencing one of the driest autumns since records began more than 100 years ago, resulting in an “extremely poor” winter crop season and weak demand for crop protection, Nufarm said on Monday.
“The limited demand for crop protection products across the country has led to increased competition and high inventory levels in the channel, resulting in significant margin pressure,” Nufarm said in a statement.
Nufarm’s profit warning pushed the stock down 93 cents, or 11.1 per cent, to a two-year low of $7.48.
Nufarm said the tough conditions has also hit the mix of products sold, with farmers buying lower margin products over more expensive goods.
The ANZ result will also be hit from the previously announced manufacturing plant upgrade work at Laverton North in Victoria.
Nufarm is reviewing the impairment implications for its Australian business, given the weak result and expected flow-on impact to the new financial year.
The company has also forecast a $12 million earnings shortfall in 2017-18 because it is waiting for French government approval for use of an insecticide under biodiversity laws, and may miss an application window for growers to use the product.