Agribusiness & Food

Drought pushes Nufarm into the red in FY18

Agricultural chemical manufacturer Nufarm has announced a $303 million capital raising program to improve its balance sheet, after decreased activity from a drought-stricken Australian market drove it to a $15.1 million loss in FY18.

Nufarm told the ASX on September 26 it had seen revenue growth in all regions except Australia during its most recent financial year, which for Nufarm ended on July 31.

But Australian sales were down 10% year-on-year due to severe drought conditions through the autumn and winter cropping periods.

“The autumn period was one of the driest on record across Australia, limiting pre-plant herbicide opportunities,” Nufarm said in its report, released on September 26. “Winter also proved to be very dry in the eastern and southern states.

“Much of New South Wales and Queensland have been declared drought affected and production is expected to be down 30% to 40% on the prior year.”

Managing director and chief executive Greg Hunt said the poor result and elevated levels of debt made a capital raising a “prudent measure”.

“A combination of severe drought conditions in Australia and later than normal selling seasons in other major markets resulted in higher levels of working capital and debt at the end of our 2018 financial year,” he said.

“While we remain confident that this will unwind and return to targeted levels, it is appropriate that we take measures to de-risk the balance sheet in the short term.”

Nufarm’s average net working capital to sales increased to 40.3% in FY18, up from 36.8%.

Higher than normal inventories in Australia and later selling seasons in USA and Europe led to delayed collections, and higher year-end receivables, the company explained.

Under the entitlement offer, Nufarm hopes to issue roughly 52 million new shares at $5.85 per share – an 11.9% discount on the dividend-adjusted closing price on September 24, and a 10.4% discount on the dividend-adjusted theoretical ex-rights price (TERP).

“It is important that Nufarm retains capacity to continue to grow its business and take advantage of new opportunities that add long term value,” Hunt continued.

“Funds raised via this offer will ensure that’s the case.”

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