Agricultural chemicals supplier Nufarm says some markets in Europe could pose a business risk, but the performance of other regions would enable it to increase its full year operating profit.
Nufarm managing director Doug Rathbone said on Tuesday that Nufarm’s European business had been tracking behind budget.
“Seasonal conditions in Europe are very mixed, and there is increased business risk associated with economic pressures in a number of European countries,” Mr Rathbone said.
“We will step away from business in those markets where we judge those risks to be unacceptable.”
But any downside in Europe would be balanced by average or generally positive seasonal and trading conditions in most other regions.
Mr Rathbone said there was no major evidence at the moment that distributors for Nufarm’s products in Europe were failing.
“We’ve had one small difficulty in Portugal,” he said.
“It’s very minor, but it just gives you an alert.”
Mr Rathbone said there were some “interesting outcomes” in the company’s European operations.
“We moved our whole Greece business to cash, and we’ve doubled our business – from a very low base, I might add.”
France would be alright if farmers had a good season, but Spain needed to be watched carefully because it had distributors in every town.
Mr Rathbone said that if Nufarm needed to walk away from some risky business, it did not mean that it was “out of Europe”.
“It’s just a `watch out’,” he said. “We have to be careful about being prudent rather than being aggressive.”
In the first half of the 2011/12 fiscal year, Europe accounted for 17 per cent of Nufarm’s total sales by region, down from 18 per cent.
Sales in Europe in the first half fell to $144 million from $158 million in the prior corresponding period, partly affected by currency exchange rates.
Nufarm on Tuesday booked an operating profit, which excludes one-off items, of $23.9 million for the six months to the end of January 2012, up five per cent from $22.7 million in the prior corresponding period.
Reported net profit was $18.0 million, up from $4.4 million.
“Directors remain confident that, given at least average seasonal and business conditions across Nufarm’s major markets over the next four months, the company will generate an improved operating profit outcome for the full year,” Nufarm said.
In the prior year Nufarm generated an operating profit of $98.28 million.
Mr Rathbone said the company’s earnings had continued to improve in the first half.
Operations in Australia and Brazil performed well as positive seasonal conditions drove strong demand for crop protection products.
In Australia, operations benefited from widespread rainfall and lower costs due to the high Australian dollar.
Operations in Australia and New Zealand generated $309 million in sales in the first half.
Operations in Brazil had improved in the wake of restructuring in 2011.
The company said it was offering a wider variety of products in the South American country and was benefiting from strong cropping activity and growth in some market segments.
Shares in Nufarm were 11 cents lower at $4.99 at 1509 AEDT on Tuesday.
