Nufarm NZ sales slip on weak dairy prices, drought conditions

Nufarm, the agricultural chemicals manufacturer, reported a 14 percent drop in its New Zealand sales as the South Island drought and the decline in global dairy prices weighed on demand for pesticides and herbicides.

Sales from is New Zealand operations fell to A$37 million in the six months ended Jan. 31, from A$44 million a year earlier, the Melbourne-based company said in a statement to the ASX.. New Zealand sales make up 3.2 percent of global revenue at parent Nufarm, which reported a 23 percent gain in first-half profit to A$23.1 million. Total sales rose 4 percent to A$1.2 billion.

Global dairy prices more than halved last year as oversupply sapped demand and weighed on prices. Meanwhile drought in the South Island further dented sales, Nufarm said.

"In New Zealand, climatic conditions were mixed, with good rains supporting sales activity in the spring pasture and cropping segments, but a dry end to the period, particularly in the South Island," the company said. "The important dairy market remains challenged due to the lower global demand."

Today, Fonterra Cooperative Group, the world's largest dairy exporter, said first-half profit sank 16 percent to $183 million, as it affirmed its milk payout forecast of $4.70 per kilogram of milk solids, half of last season's record payout of $8.40/kgMS, while also lowering guidance for dividends to a range of 20 cents to 30 cents, from a previous 25 cents to 35 cents. The Auckland-based cooperative blamed oversupply in the international market for undervaluing the commodity.

Nufarm is going through a period of consolidation, announcing last month a 30 million euro charge as it shrank its European manufacturing operations. The company is also shuttering its Auckland manufacturing plant, and two plants in Australia to reduce its footprint and improve overheads. Savings from Australia and New Zealand factory closures are forecast at A$16 million in 2017.

Shares of Nufarm, which is listed on the ASX, fell 1.7 percent to A$6.82. The stock is rated an average of 'hold' based on 11 analysts surveyed by Reuters, with a median price target of A$5.81.

(BusinessDesk)