Agricultural chemical supplier Nufarm has gained a key approval for the $1.18 billion sale of its South American businesses to investment firm Sumitomo.

The Brazilian government has given initial approval for the sale of Nufarm Brazil, which Nufarm is offloading with its Argentina, Colombia and Chile arms.

The deal, first flagged in September, includes Nufarm’s crop production and seed treatment operations in the four nations.

Nufarm will also buy $97.5 million preference shares issued to Sumitomo in August.

Brazilian government officials will have 15 days to ask for a second review of competition impact before the deal for the businesses goes ahead.

The sale is expected to be completed on April 1.

Nufarm said its South American businesses made a strong contribution to its earnings in the first half of the year.

Nufarm expected these businesses to record a loss before interest, tax, depreciation and amortisation of about $10 million in the second half.

This reflected seasonal trading patterns, Nufarm said.

The agchem supplier said the sale would help its financing costs, and depreciation and amortisation costs.

It confirmed guidance of between $55 million to $65 million for the first half of 2020.

Nufarm shares were trading even at $5.02 by 1111 AEDT.