Competitive pricing hacks into Nufarm profits

By Phil Boeyen, ShareChat Business News Editor

Monday 16th July 2001

Australian chemicals company Nufarm (NZSE: NUF) is warning its full-year result will be below expectations as it struggles with pressure on profit margins.

The company is now picking its group consolidated profit for the current year is likely to be in line with last year's result because of margin pressure in the company's Australian crop protection business.

There will also be a lower than forecast contribution from the fine and performance chemicals division.

Nufarm MD, Doug Rathbone, says while sales are now tracking in line with forecast in Nufarm's Australian crop protection business, the past few months have seen a continued deterioration in margins, due to the short term impact of rationalisation in the industry and competitor activity.

"While we are currently seeing extremely aggressive pricing activity in the market, we have identified a number of measures to build margin growth back into the business, and will see a positive impact from those measures next financial year.

"Due to the late timing of the key selling season - and the prolonged dry conditions in Western Australia - we will also not now see the anticipated level of profit generation in these latter months of the financial year.

Nufarm says it has undertaken a detailed strategy review and profit analysis on all areas of the group's operations and is confident that it will return to profit growth next year.

The company announced on Friday that it was writing off its loss making Canadian based Sulferworks operation, which has a book value around A$50 million.

Nufarm is trying to sell the business and says while discussions are ongoing with several North American companies, the outcome of those discussions is not certain and it is not prepared to take losses from the business forward into the new financial year.

Nufarm, formerly Fernz, sold out of its mainly New Zealand based fertiliser business in 1998/99, and is now focused on the global expansion of its core crop protection business and fine and performance chemicals operations.

Last month the company said it would delist its share from the NZSE in an attempt to bolster liquidity and try to improve its index rankings in Australia.

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