Australian-based farm chemical company Nufarm has slashed its profit forecast by half to between $A55 and $A65 million.
A poor final quarter from May to July, which traditionally generates the most sales for the company, has contributed to the financial plummet.
In a statement last night, the company said a preliminary review of June trading results indicated previous assumptions relating to sales and margin expectations for the quarter have not and cannot be met.
Climatic conditions in North America affecting cropping practices affected sales, with a similar story in Europe.
In Australia, crop producers were continuing to be impacted by low incomes, which influence their buying behaviour.
Managing director Doug Rathbone said the lower than expected forecast was extremely disappointing.
“As we said at the time, our previous guidance assumed at least average seasonal conditions in major markets and it is unusual to have those conditions turn against us to the extent they have,” he said.
Mr Rathbone said the substantial change in the company’s profit outlook was unsatisfactory.
“These impacts are largely seasonal and cyclical in nature and are impacting all companies operating in the sector. But we need to be concerned with the impact on Nufarm’s business and our ability to identify and react to change market conditions as early as possible.”
Mr Rathborn said the lower sales will impact the company’s year-end working capital, with net debt now estimated to be approximately $A450 million, up from $A350 million.
In a statement this morning, Nufarm confirmed its revised forecast would mean it would be in breach of one of its interest cover banking covenant by a small margin.
The company had started discussions with its lenders to seek a temporary adjustment to the interest cover ratio.