Nufarm facing class action

Nufarm, the chemicals group behind Roundup, is facing legal action from shareholders alleging that it engaged in misleading conduct relating to profit forecasts.

Yesterday Nufarm confirmed Standard & Poor's had placed its credit rating, currently BB, on negative watch because its "liquidity is currently less than adequate".

Earlier this week the company said it was in talks with its banks about renewing its banking terms after earlier covenant breaches.

Nufarm shares ended yesterday on the ASX down about 2.8 per cent at A$3.40.

Australian law firm Slater & Gordon said it had been asked by institutional investors to bring a class action against the company, which was based in New Zealand for much of the 1980s and 1990s but is now headquartered in Melbourne.

A spokeswoman for the law firm said New Zealand shareholders were invited to join the action, which relates to Nufarm shares bought on the ASX between March 2 and July 14. It is estimated that more than 200 million shares changed hands during the period.

The legal action centres on a statement issued by Nufarm on July 14, warning that it expected its underlying profits for the year to July 31 to be half of the A$110 million to $130m (NZ$139.9m to $165.3m) it had guided the market to previously.

Slater & Gordon senior associate Ben Phi said investors had expressed "serious concerns" when the July statement was made, after Nufarm repeatedly reassured the market that its previous guidance was accurate.

"The guidance [from March 2] had been confirmed on numerous occasions since the beginning of March, including in late April when the company raised A$250m from its current shareholders under an entitlement offer."

Shares in Nufarm dropped by almost 30 per cent when the profit warning was made, which it blamed on poor weather in North America and Europe and depressed demand for glyphosate-based herbicide.

"We have concluded that these are matters that Nufarm's management was or ought to have been aware of at the time it provided its profit guidance on March 2, 2010," Mr Phi said.

- © Fairfax NZ News