“Trading conditions have been difficult for financial year 2019-20 to date and this has resulted in lower earnings in all regions for the first quarter compared to the prior year,” Nufarm told the ASX.
With the update, Nufarm became the latest ASX-listed agribusiness to issue a profit warning, although unlike companies such as Bega and Costa Group, Nufarm did not mention the word drought in its trading update.
However, the company did mention a $9 million hit on first-half earnings flowing from “additional sales rebate claims from customers” relating to the already completed 2018-19 financial year.
Nufarm told the market that the additional sales rebates were identified during the reconciliation of accounts with German customers for calendar 2019.
“The company is undertaking an immediate review of internal control processes and procedures and will look to further strengthen these in the light of this matter,” Nufarm said.
Morgans analyst Belinda Moore said “it’s another disappointing announcement, it’s another earnings downgrade from Nufarm. Some of the conditions that they’re highlighting wouldn’t come as a complete surprise, given the severity of the Australian drought and what the North American operations have been through.”
Ms Moore said the trading update would normally be released at Nufarm’s annual general meeting next month, but suggested it had “been brought forward” because of the rebates issue.
Suhas Nayak, portfolio manager at Nufarm investor Allan Gray, said Nufarm’s trading update reflected “a continuation of some of the difficult trading conditions that they’ve had over the last year and a half or so”.
But Dr Nayak said the discovery of the rebates was “definitely concerning, just in terms of the systems and processes they have in place”.
According to Bloomberg data, Allan Gray holds about 6.4 per cent of Nufarm’s stock.
Darren is the mining and agribusiness reporter for The Age and The Sydney Morning Herald.