The dent to farm profitability prospects from lower crop
prices, coupled with unrest in the Middle East and Ukraine, fuelled a 37% drop
in profits at Lindsay Corporation, which cautioned over continued softness in
Lindsay Corp, the maker of irrigation equipment under brands
such as Zimmatic and Watertronics, reported a drop to $16.5m in earnings for
the March-to-May period, on revenues down 23% at $169.9m.
In irrigation equipment, revenues dropped 26%, contrasting
with a 13% increase in takings at the group's smaller road barriers division.
The fall in earnings – which on a per share basis came in at
$1.28, below Wall Street estimates of a $1.43-per-share result- reflected "lower
agricultural commodity prices", besides a US change in tax treatment for
"Lower commodity prices led to decreases in irrigation sales
throughout North America during the primary selling season," said Rick Parod, the
Lindsay chief executive officer.
"Overall favourable growing conditions in North America
continue to restrain crop prices," a factor which was creating a "headwind for
irrigation equipment demand as compared to the previous year".
With conflict in Ukraine and Middle East, where Lindsay has
won on a large Iraq order, "we have seen some slowing in international projects,
Mr Parod added that the group had "implemented appropriate
expense controls" in expectation of a "continuation of lower agricultural
equipment demand near-term".
The comments come hours after the University of Illinois estimated
that net income for Illinois farms would fall this year to levels below 15% of
those at their peak in 2012.
Lindsay said that although
the recent US storms had, in damaging on-farm irrigators, created demand for
replacement equipment, its backlog of unshipped orders was, at $73.6m, down 8.0%
year on year.
It also warned that the escalation of hostilities in Iraq
had "made it more difficult" to complete its contract in the country, on which
it has halted work because of the tensions, with some $4.4m in exposure
The company said that it "has not provided a reserve" for
the $4.4m in its accounts, but would "continue to assess the situation as
developments in the country evolve".