Russia's invasion of Ukraine has left Nufarm with up to $40 million in losses because of farm chemical inventory stuck in the warring countries.
However, strong global demand for agricultural chemicals has delivered increased overall results from the company's crop protection and seed products, prompting Nufarm to forecast pre-tax earnings of up to $340m for the first half of 2021-22.
Unsure about whether it will recover stocks or achieve future sales in the two countries, the Melbourne-based business is providing for $30m to $40m in "not material" losses from its Ukrainian and Russian activities.
Nufarm's links to the Black Sea region's latest conflict zone include subsidiary, Nufarm Ukraine and a distribution agent in Belarus.
However, managing director, Greg Hunt, said the company's maximum direct exposure from the war, in terms of inventory and receivables in both countries, amounted to less than two per cent of Nufarm's total global stocks.
While the business had emerging operations in Ukraine and Russia, its first priority had been to ensure its people on the ground and those involved with the company were safe and supported.
"Secondary to the safety of our people, we are focused on ensuring the security of supply for our customers and continue to monitor developments closely and prepare accordingly," he said.
The company was taking a "prudent approach to assessing the recoverability of its inventory and receivables and associated assets".
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However, continued uncertainty and volatility with the supply and cost of active chemical ingredients, partly caused by the war's impact on global supply chain and logistics, was an ongoing issue.
He said the market's uncertainty had actually driven growth in forward sales in the first half, which suggested first half underlying earnings would represent a much bigger proportion of the current trading year's total sales than they did in 2020-21.
Favourable trading conditions and strong grain commodity prices across all Nufarm's markets had contributed to the company's positive trading outlook in the first half of the year, with underlying earnings before interest, tax, depreciation and amortisation tipped to be in the $320m to $340m range.
Any write-downs relating to the Ukraine war were expected to be non-recurring and would be reported as a significant item.
Mr Hunt will release more insight about the Black Sea marketplace and the broader outlook for the year when first half trading results are reported on May 19.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
