Dry weather across most of Australia has crimped Nufarm’s early sales, but the agribusiness still expects underlying earnings for the whole group will be higher than those of last year.
Nufarm managing director Doug Rathbone says that with dry weather persisting in November, Nufarm faces a third consecutive year of lower-than-normal summer cropping activity by farmers in Australia and depressed demand for crop protection products.
“Our Australian sales are subsequently down on expectations and slightly below what they were for the first quarter of last year,” Mr Rathbone told shareholders at Nufarm’s annual general meeting on Thursday.
In fiscal 2014, Australia and New Zealand were Nufarm’s second biggest generators of revenue, after they were overtaken by the South American market.
Mr Rathbone said widespread rains were needed in December and January to generate a lift in performance of the Australian business.
Nufarm has been restructuring its Australian business to smooth out the impact of seasonal swings and help rebuild profit margins.
But Mr Rathbone said most of the other regions in which Nufarm operated enjoyed a positive start to fiscal 2015.
“Looking at earnings expectations for our total business to the end of January, we are currently forecasting underlying EBIT (earnings before interest and tax) to be ahead of the same period last year, placing us in a strong position to deliver underlying EBIT growth for the full year,” Mr Rathbone said.
In the 2014 fiscal year, Nufarm generated underlying earnings of $201 million.
First quarter sales in South America were slightly lower, but there was a strong lift in demand in November.
Improved margins more than compensated for the shortfall in sales, with Nufarm expecting a solid performance and growth in South America this year.
First quarter sales in Europe were slightly ahead of the prior period.
Mr Rathbone said Nufarm was assessing its manufacturing operations in Europe, with a decision expected by the end of March.
Elsewhere, Nufarm’s New Zealand business had a good start to the year despite unsettled weather, and sales and underlying earnings in Asia were slightly higher.
New product launches in Asia would help drive medium growth.
Nufarm’s North American business also had a positive start to the year, partly due to a successful early sales campaign in the turf and specialty segment.
The outlook for Nufarm’s seed business, where earnings come mainly in the second half, was also positive.
Shares in Nufarm were 20.5 cents higher at $4.545 at 1523 AEDT.