The value of Nufarm shares has grown in early trade after a $97.5 million share placement plan apparently offset the impact of a drought-related earnings downgrade.
The agricultural chemicals company said adverse weather had hurt demand for crop protection products, but also flagged a $97.5 million placement with strategic partner Sumitomo Chemical Company.
Nufarm’s share price rose by more than 7.0 per cent following the news, and was still 6.56 per cent higher at $5.20 by 1111 AEST.
“Sumitomo has been a long-term supporter and business partner and today’s agreement is a strong endorsement of the strength of our relationship,” Nufarm managing director and CEO Greg Hunt said on Thursday.
Securities may be exchanged for Nufarm shares at Sumitomo’s election any time after 24 months at an exchange price of $5.85 per Nufarm share.
Meanwhile, the company also said on Thursday it expects underlying core earnings for the year to July 31 to come in at about $420 million.
That’s lower than its previous guidance of $440 million to $470 million after crop protection sales were hurt by drought in Australia and flooding in the US.
Higher supply costs for China-sourced products and weak European sales also weighed on the ASX-listed firm’s balance sheet.
“It’s been a difficult year, with external headwinds impacting performance in three of our four major markets,” Mr Hunt said.
Nufarm said it will exclude $50 million of significant items before tax from underlying earnings in the 2019 financial year, nearly half of which relates to the unprecedented temporary closure of all formulation lines at a WA manufacturing plant due to drought.
Additional costs of $30 million relate to business restructuring costs and legal costs for the action brought in the US in relation to the Omega-3 canola patent estate.
Nufarm’s share price has dipped by more than 40 per cent during the past two years amid a crippling east coast drought in Australia.