Nufarm’s S American divestment nears
Nufarm expects to complete the sale of its South American business to Sumitomo Chemical on April 1st. The General-Superintendent of the Brazilian Administrative Council of Economic Defence, the CADE, has cleared the sale of Nufarm Brazil to Sumitomo Chemical.
Nufarm expects to complete the sale of its South American business to Sumitomo Chemical on April 1st. The General-Superintendent of the Brazilian Administrative Council of Economic Defence, the CADE, has cleared the sale of Nufarm Brazil to Sumitomo Chemical. Publication of the decision in the Federal Official Gazette will trigger a 15-day waiting period in which members of the CADE’s Administrative Tribunal can request the case for a second review. Satisfaction of the competition clearance condition precedent for the sale will be satisfied on the expiry of the 15-day period, Nufarm points out.
The gross purchase price of Aus$1,188 million ($720.6 million at the current rate) will be adjusted to reflect working capital and net debt balances as of March 31st. The net proceeds will be used by Nufarm to pay down existing debt facilities.
The South American business has made a strong contribution to Nufarm’s earnings in the first half of fiscal year (ending July 31st), the company notes. They are expected to record a loss before interest, tax, depreciation and amortisation (EBITDA) of some Aus$10 million (US$6.6 million) in the second half of the year up until April 1st.
The sale of the South American business is expected to be reported as a material item in the second half of fiscal 2020. Nufarm expects to report material items of some Aus$35 million (US$23.2 million) after tax for the first half of the year. That includes costs incurred in relation to the sale of the South American business, recognition and derogation of deferred taxation assets due to a change in the geographic distribution of assessable income, legal costs for action brought in the US to enforce Nufarm’s rights in relation to the omega-3 canola patent estate, costs relating implementation of the performance improvement programme in Australia, and financing costs related to a planned debt restructuring that did not occur due to the decision to divest the South American business.
Depreciation and amortisation are expected to amount to some Aus$220 million (US$145.7 million) in fiscal 2020, assuming no significant movement in exchange rates. This forecast incorporates an increase on prior expectations due to currency movements, savings from the completion of the sale of the South American business and some Aus$27 million (US$17.9 million) from the adoption of lease accounting standard AASB 16.
Nufarm expects to report foreign exchange costs for continuing and discontinued operations of some Aus$12 million (US$7.9 million) for the first half of fiscal 2020. Approximately Aus$7 million (US$4.6 million) of those losses relate to the divestiture of the South American business.
Nufarm has confirmed its previous guidance of underlying EBITDA of Aus$55-65 million (US$36.4-43.1 million) for the first half of 2020.