Nufarm profit to plunge

Date:06-17-2011

A continuing legal dispute with a disgruntled supplier has forced Nufarm to slash its full-year operating profit by $21 million.

Nufarm announced yesterday it had been unable to reach a resolution with the supplier about claims in relation to the 2009, 2010 and 2011 financial years.

Nufarm had recorded $58 million receivable in its accounts and had previously told investors it was confident about collecting the payment it believed it was owed from its supplier, which is believed to be US seeds giant Monsanto.

Yesterday Nufarm wrote down the value of the receivable to $25 million.

It is believed the dispute is about sales of glyphosate, one of the main ingredients in Nufarm's weedkillers. Under a deal struck with Monsanto in 2002, costs and proceeds associated with Nufarm's sales were to be shared.

Glyphosate prices fell sharply in 2009, leaving Nufarm with an expensive product it had to sell below cost. Nufarm came knocking on Monsanto's door to share the losses. But it is believed Monsanto would not budge.

RBS Morgans analyst Belinda Moore said that although Nufarm had not previously released any full-year profit guidance, the $21 million downgrade was likely to be a substantial chunk of its profits.

But, she said, the market would look beyond the bad news, believing it was a one-off cost.

The company said: ''The write-down was a non-cash item and will not impact group cash flows in the 2011 period.''