Nufarm slumps on half-year profit drop, outlook

The news: Agricultural chemicals supplier Nufarm has posted a slide in first-half profit amid higher costs and said it was reviewing the future of its seed technologies business following its weak performance.

The numbers: Statutory profit for the six months to 31 March tumbled 39.5% from a year ago to $29.8 million. Excluding material items from the year-ago period, profit was still down 24% to $38.5 million. Revenue rose 3% to $1.81 billion, while underlying earnings were down 15% to $102.7 million. The company did not declare any interim dividend, compared to 4 cents a share last year.

The context: Nufarm said conditions in its main crop protection business moved to more normal levels, with all regions growing volumes and benefiting from greater stability in active ingredient pricing. Earnings from the business were up 34% from a year ago, with solid gains in Europe and Asia Pacific, but lower in North America.

However, underlying earnings in the seed technologies business slumped 71% due to lower licensing revenues, drier conditions in Australia hurting canola sales, and a significant fall in fish oil prices slicing margins for omega-3. The company it is now undertaking a review of the entire business in an effort to maximise value, and did not rule out any options. It has hired UBS to assist with this review.