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Nufarm shares under pressure after half-year earnings downgrade

Kenneth Hall
close up of magnifying glass over paperwork

Nufarm Limited (ASX: NUF) shares are worth watching this morning following a half-year earnings update from the group.

What did Nufarm announce this morning?

Nufarm said a reconciliation of accounts with German customers for calendar year 2019 found additional sales rebate claims from customers relating to FY19.

An investigation into the matter by the company’s external auditors is ongoing. Nufarm isn’t expecting to restate its FY 2019 financial statements, but it will adjust FY20 half-year earnings.

The Aussie chemicals group is expecting a $9 million hit to earnings before interest, tax, depreciation and amortisation (EBITDA). An immediate review of Nufarm’s internal control processes will be undertaken following the finding.

What else could move Nufarm shares today?

Nufarm also took the opportunity to provide a half-year update of sorts to the market.

The company said trading conditions have been “difficult” for FY20 thus far. The Aussie company has seen lower earnings in all regions for the first quarter compared to last year. 

Nufarm’s high channel inventories and “substantially lower” demand in North America has resulted in first quarter EBITDA down $20 million on last year’s numbers.

As a result, the majority of Nufarm’s first half earnings have come during the second quarter. The company said it has become “increasingly difficult” to forecast its half year results with reasonable confidence, which could put the Nufarm share price under pressure this morning.

Nufarm expects first half EBITDA to be “significantly lower” compared to its 1H 2019 numbers.

Was there anything else?

It wasn’t all bad news for Nufarm shareholders in today’s update.

The company’s competition regulatory filings for its proposed South American business sale are well advanced.

The sale is expected to occur in the second half of FY20 subject to shareholder approval on 5 December and relevant regulatory approvals.

The Nufarm share price closed flat at $6.16 per share on Friday and has edged 5.48% higher in 2019 despite being heavily shorted.

The post Nufarm shares under pressure after half-year earnings downgrade appeared first on Motley Fool Australia.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019