Nufarm write-down on the cards

Date:05-30-2011

Nufarm is facing a potential hit to its fiscal 2011 profit after revealing that arbitration of a dispute with a major supplier had been adjourned so it could strike a potential compromise, further eroding fragile confidence in the crop protection group.

Nufarm has recorded a $58.9 million receivable in its accounts as it confidently told investors after the dispute surfaced in 2009 that it would be able to collect the payment it believed it was owed from its supplier, which is understood to be US seeds giant Monsanto, according to The Australian Financial Review.

The dispute centres on sales of glyphosate, a key ingredient in Nu¬farm's weedkillers. Under a deal struck between the pair back in 2002, costs and proceeds associated with Nufarm's sales were to be shared.

Glyphosate prices fell dramatically in 2009, leaving Nufarm with high-cost product it had to sell for much less. The company is understood to be arguing that the loses should be shared.

Nufarm managing director Doug Rathbone has told investors over the past two years that he was confident it would collect the payment from its supplier.
"Investors are looking for signs to trust the company again and if a write-down ensues, this will do little to help," said one analyst, who declined to be named.

Nufarm shares closed up 8¢ to $4.80, suggesting the market is less worried about the financial impact of its decision.

"It's not good news but given how long this matter has been outstanding, very few people would have expected this to be plain sailing and Monsanto to just roll over," one fund manager said.