Nufarm action may attract 'thousands'

HUNDREDS of disgruntled investors have registered for a class action against embattled crop-protection group Nufarm, and lawyers say the number of claimants could balloon into thousands.

By InvestSMART · 1 Aug 2011

By InvestSMART ·
1 Aug 2011

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HUNDREDS of disgruntled investors have registered for a class action against embattled crop-protection group Nufarm, and lawyers say the number of claimants could balloon into thousands.

Legal firms Maurice Blackburn and Slater & Gordon have launched two separate actions, which are seeking to recover losses from alleged material non-disclosures.

Nufarm managing director Doug Rathbone is accused of repeatedly misleading investors with optimistic forecasts, they say.

The company has denied any and all allegations of wrongdoing, and said it will "defend the proceedings vigorously."

Its shares have taken a battering, falling 24.3 per cent since February's high of $5.73 to $4.34. Last week, 6.5 per cent, or 29?, was wiped off the stock price.

A Maurice Blackburn spokesman said the firm has been instructed by a range of institutional and retail investors, with hundreds of claimants registered.

"Maurice Blackburn is continuing to see more investors join as we approach the hearing date this month," the spokesman.

"We could see thousands of investors come forward." The Maurice Blackburn claim centres on sales of glyphosate, a main ingredient in Nufarm's weedkillers, which contributes a third of the company's revenue.

Maurice Blackburn alleges that Nufarm failed to adequately inform the market of the adverse effect on the profitability of its business of a falling international glyphosate market between September 28, 2009, and August 31, 2010.

Nufarm told the market in September 2009 that 2009 glyphosate write-downs would lead to a profit in 2010. But a loss of $28.4 million in glyphosate stocks between August and December 2009 was not announced until March the following year, the Maurice Blackburn claim alleged.

Slater & Gordon alleges Nufarm "did not have reasonable grounds" for a forecast of an operating profit of $110 million to $130 million for 2009-10, made by Mr Rathbone at a March 2010 extraordinary general meeting and repeated at Nufarm's half-year results presentation on March 30, and on April 20, when it raised $250 million in new shares.

The Maurice Blackburn spokesman said a hearing was set for this week at the Federal Court in Sydney to combine the two separate actions. Registrations will close on Sunday.

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Frequently Asked Questions about this Article…

What is the Nufarm class action about and why should investors care?

The class action targets Nufarm over alleged material non-disclosures and optimistic forecasts that lawyers say misled investors. It focuses on the impact of a falling international glyphosate market (a key input that contributes about a third of Nufarm’s revenue) and disputed profit forecasts that may have affected share price and investor losses.

Which law firms have launched actions against Nufarm and who are they representing?

Two law firms — Maurice Blackburn and Slater & Gordon — have launched separate class actions. Maurice Blackburn says it is representing a range of institutional and retail investors, and Slater & Gordon has also filed claims on behalf of aggrieved investors.

How many investors have registered for the Nufarm class action and can more join?

Hundreds of investors had registered with Maurice Blackburn at the time of the article, and the firm said that number could balloon into the thousands as more investors come forward. Registrations were still open ahead of a scheduled court hearing.

What specific allegations have been made against Nufarm’s managing director Doug Rathbone?

Slater & Gordon alleges that Doug Rathbone repeatedly made an operating profit forecast of $110 million to $130 million for 2009–10 without reasonable grounds. Maurice Blackburn’s action also accuses the company of failing to properly inform the market about the negative impact of a falling international glyphosate market.

How have Nufarm’s shares reacted since the litigation issues emerged?

Nufarm’s shares fell about 24.3% from February’s high of $5.73 to $4.34. The article also reports a further drop of around 6.5% in the most recent week covered, reflecting market reaction to the allegations and uncertainty.

What role does glyphosate play in the Maurice Blackburn claim against Nufarm?

Glyphosate sales are central to the Maurice Blackburn claim because glyphosate contributes about one-third of Nufarm’s revenue. Maurice Blackburn alleges Nufarm failed to adequately disclose the adverse effect of a falling international glyphosate market between Sept 28, 2009 and Aug 31, 2010.

Did Nufarm disclose any losses related to glyphosate and when?

Maurice Blackburn’s claim notes that Nufarm told the market in September 2009 that glyphosate write-downs would lead to a profit in 2010, but a $28.4 million loss in glyphosate stocks between August and December 2009 was not announced until March the following year, according to the allegations.

What is the next legal step and how long do investors have to register for the action?

A hearing was set at the Federal Court in Sydney to seek consolidation of the two separate actions. The article states that registrations were open but would close on Sunday, so investors needed to register before that deadline to take part.