March 19, 2019 / 10:46 PM / 9 months ago

UPDATE 2-Australia's Nufarm posts H1 loss as drought persists

* Nufarm’s post half-year loss of nearly $10 million

* Shares fall 10 pct to hit more than three-year low

* Nufarm to cut Australian production in half (Updates to include share price movement, adds quote from company CEO)

By Colin Packham

SYDNEY, March 20 (Reuters) - Australian crop protection company Nufarm Ltd posted a half-year loss and cut its fiscal 2019 outlook on Wednesday as dry weather sapped demand for herbicides and fertilisers, sending its shares down more than 10 percent.

Nufarm said it recorded a net loss for the six months to Jan. 31 of A$13.6 million ($9.6 million), compared with a profit of A$12 million in the same period last year. The company also suspended its interim dividend.

With dry weather lingering across Australia, Nufarm cut its earning guidance for the year, forecasting revenues of between A$440-470 million, down from its previous estimate in the range of A$500-530 million.

Shares in Nufarm fell as much as 10 percent to hit more than a three-year low.

Much of Australia’s east coast has recorded less than half the typical rains over the past three months, bureau of meteorology data shows, stoking fears among farmers of a second consecutive crop failure.

To hedge, farmers have scrapped purchases of fertilisers and pesticides to minimise expenditure, and Nufarm said it cut production as a result.

“Farmers on the east coast of Australia are facing continued dry conditions and we’ll be scaling back manufacturing and running down inventories in anticipation of another difficult season,” Greg Hunt, Nufarm’s managing director and chief executive officer, said in a statement.

“This will impact profit in the second half as we won’t be able to fully recover manufacturing overheads.”

The company said Australia-New Zealand production levels in 2019 will be about half of that seen in 2018.

The adverse weather shows little sign of easing. Australian farmers will begin sowing wheat crops within weeks and poor weather could curtail production in the world’s fourth-largest wheat exporter.

Australia’s chief commodity forecaster in March estimated production during the 2019/20 season at just shy of 24 million tonnes, though it warned rains were needed urgently.

The Australian Bureau of Meteorology believes there is a 70 percent chance of an El Nino weather system developing this year, a weather event associated with dry weather across Australian east coast.

El Ninos are particularly damaging to Australia, with the last one in 2015/16 cutting farm production in the country - among the world’s largest exporters of agricultural products. ($1 = 1.4116 Australian dollars) (Reporting by Colin Packham in Sydney; Additional reporting by Ambar Warrick in Bengaluru; Editing by Grant McCool and Stephen Coates)

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