Calls for Nufarm chiefs head as profit tumbles
Sep. 28, 2010
Troubled farm chemicals maker Nufarm is not planning to sell any assets as part of a strategy review, its chief executive said today, amid calls for his exit after the company reported a 63 per cent full-year profit slide.
Questions about Nufarms fate have been rife following a string of profit warnings, badly timed equity raisings, a cut in its credit rating to junk status, and a blow-out in debt that triggered covenant breaches, which have knocked its shares down 61 per cent this year.
Japans Sumitomo Chemical bought a one-fifth stake in Nufarm earlier this year paying $14 a share, more than triple the current value, but has been quiet about the companys woes.
Chief executive Doug Rathbone said the review would not result in a break-up of Nufarm but would work out how to shift the companys focus away from the weedkiller glyphosate --1.htm">glyphosate, sales of which have slumped globally, on to more profitable products.
"Its wrong to say the companys going to be divided up," Mr Rathbone told analysts and reporters.
"Weve had some friendly competitors asking what bits they could have," he said, adding that was not the way the company was approaching its strategy review.
Nufarm shares closed down 3.9 per cent at $3.94, coming off a low of $3.75 after the result in a broader market that was down 0.1 per cent.
It said on Tuesday it expected the price war to continue to hurt its glyphosate profits, but said trading conditions should improve for other products, and it would introduce new products, focus on higher margin products and expand into new regions.
"These factors and initiatives provide strong confidence that the group will generate an improved profit outcome for the 2011 financial year," Nufarm said.
Mr Rathbone acknowledged that the companys problems were not just due to weather and tough competition and said it would take steps to improve its forecasting systems and treasury staff.
"There are a number of things we can do better and we assure you we will do better," he told analysts and reporters.
One analyst bluntly asked Mr Rathbone whether the overhaul might go ahead more swiftly if he stepped down. Mr Rathbone answered that that was the analysts opinion and gave no hint of bowing out.
He still owns 6.1 per cent of the company after cutting his stake to help pay down debt tied to his familys interests, which include the Yering Station wine business.
A fund manager who sold out of Nufarm about a year ago said it looked like Mr Rathbone should go.
"I think his reputation is obviously under question," said Paul Xiradis, chief executive of fund manager Ausbil Dexia.
Net profit before one-off items slid to $58.6 million for the year to July 31, 2010, from $159.6 million a year earlier.
That was at the low end of the companys July forecast of $55 million and $65 million and below analysts forecasts around $62 million.
As flagged on Monday, Nufarm paid no dividend for the year.
Its net debt blew out to $620 million as of July 31, which put it in breach of two of its debt covenants. Its lenders have waived those covenants on loans due this year, but hit Nufarm with around $10 million in higher interest costs and fees.
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