Here's why the Nufarm share price is tanking 14%

The agricultural chemicals group's largest shareholder is selling its 15.9% stake.

| More on:
A man sits wide-eyed at a desk with a laptop open and holds one hand to his forehead with an extremely worried look on his face as he reads news of the Bitcoin price falling today on his mobile phone

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Nufarm share price is sinking today after the company's largest shareholder Sumitomo dumped its entire 15.9% stake
  • Sumitomo is selling its investment at a steep loss after buying into Nufarm at $14 back in 2009
  • The sale comes even after Nufarm turned in a strong increase in first-half earnings

The Nufarm Ltd (ASX: NUF) share price has crashed to a more than three-month low this morning. It comes after the company's largest shareholder decided to dump its shares.

The Nufarm share price is currently down 14.47% to $4.995, while the S&P/ASX 200 Index (ASX: XJO) is down 0.04%.

The agricultural chemicals group told the ASX it had received word that Sumitomo Chemical Co Ltd (TYO: 4005) will be selling its entire 15.9% holding in Nufarm.

Nufarm share price sinks despite reassurances

The ASX group tried to reassure investors that its partnership with Sumitomo is still intact despite the sell-off.

Nufarm said:

Nufarm and Sumitomo plan to continue their mutually beneficial business alliance that started more than 12 years ago. The crop protection business is important to both companies and therefore the desire to continue to grow the commercial relationship and synergies in global agriculture markets remains a key objective.

Sumitomo licking its Nufarm wounds

No reason was given why Sumitomo was quitting the Nufarm share register. Perhaps the 20% jump in the Nufarm share price over the past year (before today's crash) enticed it to sell.

Mind you, not that Sumitomo is exiting with a profit. The Japanese group paid $14 a share for Nufarm back in late 2009, reported the Australian Financial Review.

It's believed that Sumitomo sold the Nufarm shares at $5.38 to crystallise the painful 60% loss.

The investment was meant to help Sumitomo negotiate strategic agreements to distribute chemicals globally.

But China foiled those plans when its manufacturers sent the glyphosate share price tanking by flooding the market with the chemical.

Nufarm share price could find redemption

The block sale comes after Nufarm reported a 41% increase in first-half underlying earnings before, interest, tax, depreciation and amortisation (EBITDA) to $330 million.

However, the Nufarm share price slumped on the earnings news, even though most brokers were impressed by the results.

Strong soft commodity prices and a good crop outlook should be bolstering the fortunes of ASX agri-businesses.

The Elders Ltd (ASX: ELD) share price is one example. That shot up strongly on its strong profit result yesterday.

Perhaps once the dust settles, the Nufarm share price can find supporters again.

Motley Fool contributor Brendon Lau has positions in Elders Limited and Nufarm Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

Image from either construction, mining or the oil industry of a friendly worker.
Materials Shares

Buying Rio Tinto shares? Here's your Q3 preview

The mining giant is releasing its quarterly update next Wednesday.

Read more »

a man sits on a rocket propelled office chair and flies high above a city
Materials Shares

Why this OTHER ASX lithium stock is rocketing higher today

Up 107% in a month, investors just sent this ASX lithium stock surging again!

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Capital Raising

Guess which ASX 300 copper stock is crashing 12% today

Let's see what is causing this stock to sink deep into the red.

Read more »

A silhouette shot of two business man shake hands in a boardroom setting with light coming from full length glass windows beyond them.
Mergers & Acquisitions

Rio Tinto share price rises on $10b Arcadium Lithium takeover deal

Management believes the deal makes it a global leader in energy transition commodities.

Read more »

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Materials Shares

3 reasons IGO shares are making news this week

Shares in the mining company are springing to life this week.

Read more »

Miner on his tablet next to a mine site.
Materials Shares

The Core Lithium share price is up 37% in a month. Should you sell now?

Should ASX investors sell the rebound in Core Lithium shares?

Read more »

Three miners looking at a tablet.
Materials Shares

Buying BHP shares? Here's your quarterly preview

What is the market expecting from the Big Australian next week?

Read more »

A white EV car and an electric vehicle pump with green highlighted swirls representing ASX lithium shares
Materials Shares

Novonix shares charge higher on 'fantastic' UK deal

Novonix Ltd (ASX: NVX) shares are catching the eye on Wednesday morning. In morning trade, the battery materials and technology…

Read more »