Nufarm Ltd (ASX: NUF) shares are being sold off on Thursday.
In morning trade, the ASX 200 stock is down 12% to a 52-week low of $3.86.
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Why is this ASX 200 stock being sold off?
Investors have been hitting the sell button after the agricultural chemicals company amended its guidance for FY 2024.
According to the release, the ASX 200 stock's underlying EBITDA is expected to be in the range of $300 million to $330 million in FY 2024. This is down from its previous guidance of between $350 million and $390 million.
Management notes that this is largely a consequence of the continuation of what it believes is a temporary downturn in the industry environment.
This has resulted in competitive pressure causing adverse movements in price and product mix, which are particularly impacting the ASX 200 stock's North American crop protection business.
Nufarm notes that these conditions are also reflected in recent peer group reporting.
In addition, the company has seen lower than anticipated demand for industrial products from its manufacturing facility at Wyke, which has negatively impacted its European crop protection business.
What else?
Also putting pressure on its shares is an update on its net leverage, which has worryingly increased materially due to its lower earnings expectations. It expects its net leverage to be approximately 2.5 times to 2.7 times underlying EBITDA. This is a big increase from its previous guidance of "towards the upper end of a 1.5 to 2.0 times range."
Finally, completing the unwanted trifecta, management revealed that it has achieved lower than anticipated pricing for its omega-3 oil, which has negatively impacted expectations for FY 2024. Omega-3 revenue for FY 2024 is now expected to be in the region of $50 million
Positively, management advised that omega-3 demand remains healthy, and the business is anticipating strong growth in revenue in FY 2025. So much so, management is expecting to more double its omega-3 revenue.
Commenting on its prospects in the next financial year, the ASX 200 stock said:
The past financial year has seen a period of intense competition and depressed pricing in global markets. During this time, Nufarm has maintained strong commercial discipline, continuing to invest in our growth platforms while tightly controlling discretionary spend. Nufarm expects to return to growth on the back of more normal trading conditions in FY25.
Following today's decline, the Nufarm share price is down 23% since this time last year.
