Nufarm prepares for capital raising to shore up its balance sheet amid drought

  • Sep 25, 2018 AEST
  • Team Kalkine
Nufarm prepares for capital raising to shore up its balance sheet amid drought

Amid considerable drop in crop protection sales at the back of drought conditions prevailing in Australia, the crop chemical and seed business company Nufarm advances towards the launch of fresh capital raising for healing.

Street talk heard ASX listed Nufarm is set to raise a $300 million equity capital from its institutional investors. The company targets to tap the pocket of existing shareholders through an entitlement offer which is expected to be announced this week along with the release of annual results for the period ended 30 June 2018.

Early this morning Nufarm pressed the paused button on ASX ahead of proposing equity issue to the prospective investors. In an application to Australian Securities Exchange the company requested to place its securities in the trading halt for minimum of four business days starting from today, 25 September 2018. The halt in trading of company’s securities comes after the pending market announcement in relation to capital raising from institutional investors via an accelerated entitlement offer. Meanwhile, it was heard that about 12% of Nufarm shares are in the hands of short sellers.

Underwriters Macquarie Capital and UBS may have to face the tough time ahead of downgrading the performance of Nufarm.

Amid drought conditions where Australians have no crop to protect, Nufarm shares plunged to the lowest level recently since last 2.5 years. The crash in share price of Nufarm Limited came after the downgraded profit in May and July this year following the negative court ruling against glyphosate use. However, in the recent release dated 4 September 2018, the company announced that Brazilian court has cancelled the herbicide glyphosate products suspension.

As per the company’s information, the decline in profit emerged due to the negative effect of prevailing drought conditions which resulted into a lower sale of crop protection products in Australia as well as the other markets.

The headwinds from struggling performance of the company amidst drought and the risk of potential equity issue places considerable risk in the stock direction.

Before going into the trading halt, the securities of Nufarm Limited last traded at $6.7 ahead of -1.471% of daily price change recorded on 24 September 2018. The trading halt is expected to remain in place till the earlier of 1 October 2018 or the release of market announcement on the completion of capital raising.

Currently, the stock was trading at a PE of 17.880 x with market capitalization of $2.2 billion. There has been change in the stock performance of the company by -23.43% over the past one year.

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