Maurice Blackburn

On 12 August 2011, a representative proceeding against Nufarm Limited was filed in the Federal Court of Australia seeking to recover losses suffered by shareholders as a result of alleged material non-disclosures and misleading conduct relating to Nufarm's glyphosate business.

The class action consolidates two separate claims previously filed by law firms Maurice Blackburn and Slater & Gordon.

The proceeding is brought on behalf of Nufarm shareholders who acquired an interest in Nufarm securities between 28 September 2009 and 31 August 2010 and who suffered loss as a result of the alleged misconduct. As presently constituted, to be a group member in the class action, shareholders must have held some or all of the shares acquired in this period until 1 March 2010, 13 July 2010 or 31 August 2010.

Nufarm

Nufarm is an Australian-based crop protection company. Its business includes the production and supply of agricultural chemicals throughout the world, including the sale of glyphosate products which historically contributed to approximately one third of the company's overall revenue.

Glyphosate

Nufarm has been licensed to sell Roundup (a Monsanto trademarked glyphosate product) in Australia since 2002. Chinese glyphosate manufacturers came online after the expiry of Monsanto's exclusive patent on glyphosate in the year 2000.  In readiness for the 2008 Olympic Games in Beijing, many Chinese glyphosate manufacturing plants closed and from August 2007 glyphosate prices soared, reaching record highs in the middle of the 2008 calendar year.

However, from around September 2008 international glyphosate prices underwent a major decline. The price of 'glyphosate intermediate' from China fell from $13 per kilogram to less than $4 in six months. In response to the decline, on 17 September 2009, Monsanto, the world's leading producer of glyphosate, confirmed that it was cutting retail glyphosate prices by up to 50% compared to the previous year.

28 September 2009 to 1 March 2010 representations

On 28 September 2009, less than two weeks after Monsanto's announcement, Nufarm made statements to the effect that its profit for the upcoming financial year would be better than the profit achieved in FY2009. The company disclosed an after tax write-down to its glyphosate inventories, as at 31 July 2009, of $40.8 million and claimed that this would enable the company to generate profits in FY2010, while continuing to sell glyphosate at market competitive prices. Nufarm later revealed that from August to December 2009 it had made a strategic decision to sell glyphosate inventory at lower prices than its revised book value, thereby resulting in further losses.

Nufarm publicly re-affirmed its outlook on glyphosate and improved profit in its final annual report released 26 October 2009. A day later, Monsanto said its gross profit from glyphosate would decline in 2010 in light of the price reduction and global oversupply of low priced generic material. On 3 December 2009, Nufarm repeated that there would be a material improvement in its glyphosate business in 2010, that its FY2010 profit would be better than that of FY2009, and that its cash flow and balance sheet would improve. The company also said that it expected to continue to operate within its various banking covenants.

The Australian Securities and Investments Commission (ASIC) has since concluded that by 11 February 2010, Nufarm's board of directors had received operational information for the period 1 August 2009 to 31 December 2009 that suggested an operating profit of between $5 - $7 million for 1H2010, representing an 89% fall in profit from the previous corresponding period. However, Nufarm failed to disclose this information to the market until 2 March 2010, when it published its expected 1H2010 results. ASIC considers that from 11 February to 2 March 2010 Nufarm contravened the continuous disclosure provisions in the Corporations Act 2001. As a result, in December 2010, Nufarm agreed to pay a $66,000 fine and gave enforceable undertakings to ASIC.

2 March 2010 to 13 July 2010 representations

On 2 March 2010, Nufarm held an Extraordinary General Meeting. At this meeting Nufarm, inter alia, announced an expected $40 million loss for 1H2010. Of this figure, some $33 million was said to represent material items including glyphosate trading impacts. However, for FY2010 as a whole, Nufarm forecast a headline result, including the impact of material items, of between $80 and $100 million and an operating result of between $110 and $130 million. Nufarm stated that the projected recovery was consistent with what had been achieved in previous years and was based on 'realistic assumptions'. Nufarm also forecast that it's net debt at the end of FY2010 would be approximately $350 million.

At the end of March 2010, in its 1H2010 report to shareholders, Nufarm again stated that it expected a strong recovery in 2H2010 and reaffirmed its 2 March 2010 forecast. The company also said that at the end of the FY2010 period its balance sheet should be in a strong position and that it would generate acceptable margins on glyphosate (other than in the US) and that net debt would be $350 million.

On 20 April 2010, Nufarm announced a fully underwritten entitlement offer of $250 million at $5.75 per share and again reaffirmed its 2 March 2010 guidance for FY2010. Nufarm reiterated that its earnings would recover in 2H2010.

On 27 May 2010, Monsanto announced a reduction in its full year earnings, stating that a sharp decrease in earnings was attributable to poor glyphosate performance. On 28 May 2010, Nufarm responded to Monsanto's announcement stating that its previous forecasts of profit and net debt for FY2010 were still appropriate. Nufarm specifically stated that Monsanto's adjusted earnings guidance relating to its glyphosate business had 'limited implications for Nufarm's own business and earnings outlook'.

On 22 June 2010, Nufarm represented that it would continue to keep the year end under close/regular review and advise the market if it formed a different view of the final result.

14 July 2010 to 31 August 2010 representations

On 14 July 2010, two weeks prior to the end of the FY2010 period, Nufarm downgraded its FY2010 profit forecast by 50% to $55 - $65 million, excluding non-operating items. Net debt was also forecast to increase by $100 million, to $450 million.

On 15 July 2010, Nufarm announced it was in breach of one of its banking covenants.

Nufarm's share price fell dramatically from a close of $5.24 on 13 July 2010 to a low of $3.25 by 19 July 2010 (a fall of 38%).

On 1 September 2010, Nufarm confirmed the revised profit guidance given on 14 July 2010, but announced that its net debt as at 31 July 2010 would be approximately $620 million, substantially higher than the revised estimate of $450 million given on 14 July 2010. Nufarm further confirmed that this substantially increased net debt position had resulted in a breach of another of the company's banking covenants.

As a result of this announcement, Nufarm's share price fell from a close of $3.85 on 31 August 2010 to a low of $3.39 by 3 September 2010 (a fall of 12%).

The claim

Nufarm is a listed disclosing entity within the meaning of the Corporations Act 2001. As such, it is required to comply with the 'continuous disclosure' regime under ASX Listing Rule 3.1 and section 674 of the Corporations Act 2001. Under these provisions, Nufarm is required to advise shareholders and the market of all information of which it was, or ought to have been, aware which might materially affect its share price. Information is likely to have a material effect on the share price if the information would be likely to influence people who commonly invest in shares in deciding whether to buy, sell or retain shares.

The claim alleges that during the claim period, Nufarm failed to disclose the true position to the market and was therefore in breach of its continuous disclosure obligations.

The claim alleges that various statements made during the claim period were misleading and that the company did not have any reasonable basis to make such representations.

How to be represented in the class action

If you acquired an interest in Nufarm shares between 28 September 2009 and 31 August 2010 (inclusive) you will be a group member in the class action and it is not necessary for you to retain us to receive compensation if the case is successful. However, there are benefits for group members who retain us. In particular, our clients will be given regular updates, personal advice, notification of court orders and notice of and assistance with the formal lodging of claims. 

Maurice Blackburn is conducting this class action on a 'no win - no charge' basis, which means that you will not be asked to pay any legal costs or expenses during the conduct of the litigation.  If the class action is successful Maurice Blackburn's fees will be paid by Nufarm, its insurers or as part of the total group member damages pool.

Contact us

If you would like to find out more about the benefits of retaining us as to act for you in the class action, or you have any questions, please contact us at Nufarmclassaction@mauriceblackburn.com.au with your name and contact details.  You can also speak with our lawyers Jason Geisker and Anna Williams on 1800 810 812 (in Australia) or +61 2 9261 1488 (international).