Nufarm Disappoints the Market With Weak First Quarter Commentary and an Internal Control Black Mark

Our AUD 7.00 fair value estimate is unchanged. That despite Nufarm disappointing the market with a lacklustre performance for the first quarter of fiscal 2020. The company notes a continuation of difficult trading conditions, including lower earnings from all regions versus the previous corresponding period, or pcp. This includes higher channel inventories and lower demand in North America resulting in EBITDA from the region being approximately AUD 20 million below the pcp. Nufarm flags an additional AUD 9 million EBITDA hit due to sales rebate claims from German customers, embarrassingly missed in the prior fiscal year. While the earnings implication is modest, it regardless doesn’t sit well with a market already jittery around inventory builds in more recently acquired European businesses, ongoing drought, and glyphosate cancer link fears. Nufarm shares declined 18% intra-day.