Nufarm's 2007 annual report (pictured). The company has ended talks on a potential bid from a consortium comprising China National Chemical Corporation, the Blackstone Group and Fox Paine Management III

The Australian multinational provided the consortium with due diligence during the exclusivity period. It is not obliged to reimburse any of the consortium's costs and is no longer under exclusivity obligations, the company notes. Nufarm has received a number of offers for take-over, merger or equity investment over the past 20 years. However, none was at a price level that prompted a board response prior to the November offer.

Nufarm chairman Kerry Hoggard says that the board and management remain committed to maximising shareholder value. "We are strongly positioned to generate additional growth from our existing business and to participate actively in industry consolidation opportunities," Mr Hoggard says. "Nufarm will continue with its expansion plans in the context of a very positive environment and future outlook for companies involved in agricultural industries."

Nufarm stands by its September forecast of a net profit of some Aus$145 million in fiscal 2008 (Agrow No 529, p 7). Speaking at the company's annual general meeting this month, managing director Doug Rathbone said that Nufarm needed to see a strong recovery in its Australian business. However, he also pointed to a "robust and geographically diverse business, with excellent growth opportunities in a number of markets around the world".

Continuing dry conditions in most parts of Australia resulted in a "challenging" first quarter to October 31st. Revenues and profit have been impacted by: significantly lower sales of post-emergence herbicides in drought-affected winter cereal crops; relatively low sales of cereal fungicides; and lack of irrigation water for horticultural crops in the Murray Darling basin.

New South Wales is getting rains, which is good for Nufarm's business. The southeastern Australian state resides in the Murray-Darling basin, which is experiencing dry conditions in some parts Photo: Dave Sackville

Recent rains in northern New South Wales and southern Queensland augur well for better summer crop plantings in these areas than in the previous year, Mr Rathbone pointed out. High commodity prices and strong demand could result in "robust cropping activity if climatic conditions allow". Mr Rathbone said that Nufarm will be ready to meet demand if the Australian market recovers.

The executive welcomed the recent decisions by the New South Wales and Victoria governments to lift their bans on the cultivation of genetically modified canola (Agrow No 533, p 18). The ending of the state moratoriums will allow Nufarm to market its glyphosate-tolerant Roundup Ready canola next year. Nufarm acquired a licence to the technology from Monsanto last year (Agrow No 505, p 2). Nufarm's Nuseed business is said to be the leading supplier of canola seed in Australia.

Elsewhere, Nufarm's North American business is ahead of budget, with the US operation having a particularly strong start to fiscal 2008. Strong commodity prices are having a positive effect on sales of glyphosate and phenoxy herbicides, as well as other Nufarm products, such as the insecticide, Nuprid (chlorpyrifos), Mr Rathbone noted. He was confident that Nufarm would maintain this positive start for the rest of the year and expected to see "another excellent performance from our North American business".

Industrial action in Brazil in August and September resulted in "substantial delays" in raw material deliveries to Nufarm's manufacturing facility in Fortaleza. The delays resulted in a "below budget" start to the year in Brazil, but the financial position is recovering and is expected to be back in line with expectations by the half-year stage. The Brazilian agriculture sector continues to recover strongly from the credit problems of the past two years, with agrochemical sales forecast to rise by at least 25% to US$5,000 million this year (Agrow No 530, p 18), Mr Rathbone noted.

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Nufarm achieved outright ownership of its Brazilian affiliate, Agripec, in June (Agrow No 521, p 3). The multinational has since become aware of a barter trade system, which hedged product sales against the price of soybeans for July 2008 receivables. High soybean prices mean that Nufarm expects to incur an after-tax liability of some Aus$10 million from the practice. Excluding this liability, Nufarm forecasts a group net operating profit of Aus$18-23 million for the six months to January 31st 2008.

The company's full-year profit forecast is based on a number of assumptions, including the provision of adequate supplies of glyphosate. Strong demand for the herbicide is putting a strain on global production capacity, Mr Rathbone pointed out. Nufarm is the second-largest glyphosate supplier after Monsanto. Mr Rathbone was confident that Monsanto would remain an important supplier of glyphosate and its raw materials to Nufarm, but the Australian firm is pursuing various options to secure supplies in the long term. It has several initiatives in place with Chinese glyphosate manufacturers. Nufarm expects to provide further details of these "strategically very important" plans in due course.

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