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Lindsay Corp falls into the red, and braces for further setbacks

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Lindsay Corp dealt another blow to the farm supplies sector by unveiling a surprise fall into the red, reflecting a bad debt from a customer in China besides a "challenging" market.

The irrigator and road barrier manufacturer, whose brands include Skyharvester, Watertronics and Zimmatic, reported a net loss of $3.2m, equivalent to $0.28 per share, for the June-to-August quarter.

Investors had expected earnings of $0.55 per share for the quarter, the last of the group's fiscal year.

Lindsay shares stood 4.1% lower at $65.82 in afternoon deals in New York.

'Challenging year'

The decline into the red reflected largely a worsened operational performance as weaker crop prices, undermined by a strong dollar as well as more ample global supplies prompted farmers to tighten their purse strings.

The group highlighted an official forecast that US farm net income will tumble 36% this year to $58.3bn.

"It has been a challenging year as lower grain prices, falling currency rates relative to the dollar, and accounting adjustments to asset valuations have impacted sales and earnings in the fourth quarter and year," said Richard Parod, the Lindsay chief executive.

A 16% drop to $123.5m in revenues for the quarter was led by a 23% tumble to $96.9m in sales in irrigation – a decline reflected in both US and international operations.

'Sentiment is mixed'

However, the group also flagged a charge of $5.0m for a customer default in China.

And it cautioned over the potential for further setbacks.

"While commodity prices appear to have stabilised, farmer sentiment is mixed and US and international irrigation equipment demand remains challenged," Mr Parod said.

The group said that "delays" to large irrigation orders abroad were "possible", given the environment of lower commodity prices.

And it said that "political instability in the Middle East and government sanctions in the Russia/Ukraine region continue to affect these markets".

Sector difficulties

The results reflect the latest of a series of downbeat statements from companies supplying farmers with inputs or machinery, and came hours after agrichemicals giant Syngenta revealed worse-than-expected quarterly sales data.

Within the last 10 days two other agrichemicals groups, FMC Corp and Platform Specialty Products, have warned on profits, while Monsanto forecast earnings for its newly-started financial year well below levels that investors expected.

In the agriculture sector, data earlier in the week from the Association of Equipment Manufacturers showed US tractor sales falling by 12.5% last month, led by a 48% slump to 213 vehicles in sales of the large four-wheel drive tractors used by big crop farmers.

Combine sales were 19.9% lower year on year.

The strong dollar - besides undermining crop prices, by making dollar-denominated exports such as ags less affordable – has also for companies reporting in the currency hurt the value, in greenback terms, of foreign revenues.

By Agrimoney.com

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