Tuesday 30th March 2010
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Nufarm, the Melbourne-based global crop protection company, made a A$40 million loss in the six months to January 31 as global prices for the weedkiller glyphosate pole-axed inventory and forced price support to retain share in key markets, especially the United States.
However, a bounceback is expected in the second half, with a headline net profit of between $80 million and $100 million forecast for the full year to July 31, the company said in a statement to the NZDX, where Nufarm Finance (NZ) Ltd has debt securities listed.
Nufarm is the amalgamated entity created after merging with its parent, one-time NZX-listed Fernz Corporation, in 2000.
A combination of adverse climatic conditions in European markets during the period and price-cutting on glysophate caused by competitors seeking to drop inventory levels were the main drivers behind group sales falling $890 million to $1.24 billion during the period.
The impact of lower prices for glysophate - the generic name for the Monsanto product Round-Up, which came off-patent a decade ago - was demonstrated most dramatically in a $435 million fall in net working capital to $1.1 billion, of which $364 million was writedowns on glyphosate inventory.
However, the company believed it had retained market share by matching competitors' pricing, although losses on sales and price support for key customers accounted for $29.4 million of the reported loss.
Nufarm had now moved the six months' inventory of glyphosate held at the beginning of the period into the market, and was "now purchasing glysophate acid at market competitive prices and expects to generate more acceptable margins on sales that take place in the balance of the year".
The company expects to demonstrate recovery in the second half.
"While glysophate pricing is expected to remain very competitive, Nufarm will generate acceptable margins in most markets, with the US glysophate segment still transitioning to a more normal level of profitability."
Climatic factors would largely determine sales performance in the second half, with the latest profit projections based on assuming "at least average climatic conditions and subsequent demand in the key selling regions".
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