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Lindsay blames crop price fall for drop in profits

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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 demand.

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 investment spending.

'Market headwind'

"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, as well".

Iraq setback

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 outstanding.

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".


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