Nufarm takes $28m hit on Monsanto debt

THE farm chemicals supplier Nufarm has settled its long-running dispute with agribusiness giant Monsanto, announcing it would take a $28 million hit to profits when it finalises its accounts this month.

By InvestSMART · 13 Sep 2011

By InvestSMART ·
13 Sep 2011

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The accounts included a $58 million receivable related to the three-year dispute with Monsanto, over previous arrangements for the supply of glyphosate, but Nufarm wrote that down to $25 million in June.

Yesterday the company said it would write the receivable down further, to $13.5 million, which analysts said was about $7 million worse than expected.

"It wasn't good but it could have been worse," said the Citigroup analyst Tim Mitchell.

Nufarm's chief executive, Doug Rathbone, said the board decided to approve the settlement after considering "the time that would have been consumed by further hearings to ... determine the issues between the parties, litigation risk, and the ongoing commercial relationship between the parties".

The company must refinance $600 million in debt by December but said the writedown would have no impact on talks with bankers. It also said it would hit or exceed the upper range of its profit guidance of $94 million for fiscal 2011.

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Frequently Asked Questions about this Article…

What did Nufarm announce about its dispute with Monsanto?

Nufarm said it has settled its long-running dispute with agribusiness giant Monsanto and will take a $28 million hit to profits when it finalises its accounts this month.

How large is the $28 million hit and when will it affect Nufarm's profits?

The company said the $28 million reduction will be recognised in its upcoming accounts, which it will finalise this month.

What was the receivable related to the Monsanto dispute and how was it written down?

Nufarm’s accounts originally included a $58 million receivable tied to the three-year dispute over glyphosate supply. The company wrote it down to $25 million in June and has now reduced it further to $13.5 million.

Why did Nufarm decide to settle the Monsanto dispute rather than continue legal action?

Nufarm’s chief executive said the board approved the settlement after weighing the time that further hearings would consume, the litigation risk and the importance of maintaining the ongoing commercial relationship between the parties.

How did analysts react to Nufarm’s write-down in the Monsanto matter?

Analysts said the latest write-down to $13.5 million was about $7 million worse than expected. Citigroup analyst Tim Mitchell commented, “It wasn't good but it could have been worse.”

Will the Monsanto-related writedown affect Nufarm’s debt refinancing plans?

Nufarm must refinance $600 million in debt by December, but the company said the writedown will have no impact on its talks with bankers.

What impact will the settlement have on Nufarm’s profit guidance for fiscal 2011?

Nufarm said the writedown will not prevent it from hitting or exceeding the upper range of its profit guidance of $94 million for fiscal 2011.

What was the Monsanto dispute about and how long did it last?

The dispute was a three-year disagreement with Monsanto over previous arrangements for the supply of glyphosate, a widely used farm chemical.