Drought in Australia dents Nufarm earnings in H1 FY2014

Nufarm Limited recently announced that it expects to meet its first half (ended on Jan 31, 2014) guidance for earnings before interest and tax (EBIT)of $50 million to $60 million, but towards the lower end of the range.

Unfavourable seasonal conditions persisted in Australia during December and January with hot and dry weather in key growing regions. This has resulted in unusually low sales activity and depressed margins. The first half performance of Australia is broadly expected to be in line with the first half of the previous year.

While Australia will contribute a lower than expected result in the first half, other parts of the business are performing strongly. Brazil, in particular, has continued to experience very positive business conditions and the South American business will post an excellent first half result.

The European, North American and Asian businesses are tracking in line with expectations, with the major Northern Hemisphere seasons typically getting underway in March.

While the seeds business has suffered some lower sales of sorghum and sunflower products due to dry conditions in Australia over the summer, it remains well positioned to continue generating earnings growth on a full year basis.