Nufarm shares slump after earnings downgrade
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More news: Shares in Nufarm have slumped more than 10% to $3.94 after the agricultural chemicals supplier slashed its full-year earnings guidance as a pricing downturn extends into the second half of the fiscal year.
It now expects underlying earnings to be between $300 million and $330 million, down from its previous estimate of $350 million to $390 million.
RBC Capital Markets analyst Owen Birrell said Nufarm's downgrade was unexpected, although it wasn't surprising given the soft guidance from its North American peers.
What they said: "At the 1H24 result, Nufarm were predicting a 'flat' price environment that has not eventuated during this quarter and therefore led to the downgrade today," Birrell said.
"It clearly confirms Nufarm's operating and financial leverage to market pricing, with material impacts from both top-line growth and gross margin compression. While there was no mention regarding the company's long-term ambition targets in this update, we are mindful that time is running out to achieve the 20% average price rise required by FY26."
Nufarm cuts FY earnings guidance amid pricing downturn
The news: Agricultural chemicals supplier Nufarm has slashed its full-year earnings guidance as a pricing downturn extends well into the second half of the fiscal year.
The numbers: The company now expects full-year underlying earnings to be between $300 million and $330 million, down from its previous estimate of $350 million to $390 million.
As a result, net leverage is expected to be 2.5 to 2.7 times of underlying EBITDA, up from the previous guidance of ‘the upper end of 1.5 to 2.0 times’.
The context: Nufarm said it lowered earnings expectations due to reduced confidence the industry environment will improve for the remainder of FY24. It said the downturn has resulted in competitive pressure causing adverse movements in price and product mix, particularly at its North American crop protection business.
The group has also seen lower than anticipated demand for industrial products from its Wyke facility in the UK, negatively affecting its European crop protection business.
Nufarm estimated the impact from the change in gross profit margin at approximately $90 million for the first 10 months to 31 July. The company had previously reported a 61% slide in first-half net profit amid challenging trading conditions in its main crop protection business.
The source: ASX announcement
