Shares in pesticide maker Nufarm have dropped by more than eight per cent as hot and dry conditions on the east coast weaken demand for its products.
The Melbourne-based company has also announced the loss of a distribution contract with global chemical maker BASF from 2014.
But Nufarm still expects to meet its financial forecasts in the first half of the 2012/13 financial year, due to better than expected earnings from its operations in Europe and South America.
Nufarm shares were down 51 cents, or eight per cent, at $5.82 at 1522 AEDT, more than wiping out the gains of a recent rally that took the shares to a two-and-a-half year high of $6.41.
First half profit in Nufarm’s Australian and New Zealand business will be well down from the same period in the previous year, and the company indicated its full year result could also suffer.
That’s because of unfavourable conditions in the summer cropping regions of northern NSW and Queensland, it said.
“These regions have experienced unusually hot and dry conditions for much of that period, particularly in the months of December and January,” Nufarm said in a statement.
“This has impacted in a number of market segments, including relatively high value segments such as cotton, horticulture and other summer crops.”
Autumn rainfall will determine planting activity and the demand for crop protection products in the second half of the financial year, Nufarm said.
The lower Australian earnings will be offset by a better than expected performance from Nufarm’s international operations, and the company has maintained its forecast of growth of at least 15 per cent in its underlying first half profit, from the previous corresponding period’s $37.8 million.
Meanwhile, Nufarm’s distribution arrangement in Australia with BASF will end on March 1, 2014, as the German company intends to enter the Australian market on its own.
The BASF deal generates under 10 per cent of Nufarm’s Australian revenue, and less than three per cent of its global revenue.
Nufarm said it would be a strong competitor against BASF after the distribution deal ends, using existing and new products.
Nufarm also announced the purchase of US-based Cleary Chemical Corporation, which provides fungicides and insecticides to the turf market, for $US10 million ($A9.51 million).
