Australia’s severe drought dragged sales down nearly 10 per cent to $590.1 million.
Queensland and NSW in particular were severely affected by drought this year with crop production expected to be at a 30 to 40 per cent decline on the previous year.
Total crop protection sales increased by 6 per cent to $3.1 billion, but underlying EBITDA fell by 1 per cent to $395.7 million mainly due to the Australia and New Zealand segment. The crop protection underlying gross profit margin was 28.3 per cent of sales, in line with the previous year of 28.4 per cent.
Nufarm said it still expects earnings to increase in 2018/19 depending on the drought easing. The company announced that it will pay an unfranked dividend of six cents per share, down from eight cents in 2017.
The AFR reported Nufarm is expected to launch a $300 million equity raising via an entitlement offer to current shareholders and underwritten by investment banks UBS and Macquarie Capital. In other countries Nufarm’s revenue increased 6.3 per cent to $3.31 billion, due to its acquisition in Europe of product portfolios from FMC Corporation, Adama and Syngenta.
“The acquired portfolios consist of established brands, formulations and registrations for the European market. These product portfolios strengthen the company’s position in our core crops and key markets in Europe and provide additional scale that will make Nufarm more relevant to both key distribution customers and end-users,” said GA Hunt, managing director and CEO of Nufarm in a statement.
“Australia’s ongoing east coast drought, recent negative court rulings against glyphosate use, and the risk of a potential equity issue continues to overhang the stock,” Citi told clients according to AFR.
Citi expects Nufarm to report $1.32 billion net debt as at its July 31 balance date, which would represent 63.3 per cent gearing. While Deutsche Bank analysts also flagged the risk of an equity raising in a note to clients on Monday.
Agribusiness Nufarm last raised equity in 2017 upon launching a $446 million rights issue via UBS and JPMorgan. The agribusiness deal was done at $7.50 a share.