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Lindsay shares tumble, as farmer spending stays 'constrained'

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Shares in irrigation equipment-maker Lindsay took a tumble, as the company's latest set of financial results missed analysts profit and earning expectations.

Shares fell as low as $72.72 in New York, down 7.4%, on the news that the company made an unexpected loss over the three months to the end of February.

Low commodity prices are still keeping pressure on demand for irrigation equipment in the US and internationally, Lindsay said

Squeezed budgets

Lindsay chief executive Rick Parod said that the market for irrigation equipment in North America, which should now be in the midst of its seasonal peak, is under pressure to tight farm budgets.

"While we have seen signs of stabilization, the market continues to reflect reductions from peak periods in farmers' investments in equipment due to the lowest projected net farm income since 2002," Mr Parod said.

"The irrigation markets continue to be constrained by lower commodity prices and foreign exchange rates," said Mr Parod.

Lower farm income

Lindsay noted that net US farm income is expected to be down 3% in 2016, at $54.8bn, with an "increase in grain stocks compressing commodity prices".

Still, he expressed hopes that long-term prospects "remain positive" thanks to "population growth, expanded food production, efficient water use and infrastructure upgrades and expansion".

In overseas markets, Lindsay said that low commodity prices could delay the implementation of large irrigation projects.

Falling profits

In the three months to February 29, Lindsay reported revenues down 15% year-on-year, at $120.6m, short of analyst expectations of $123.8m.

The company made a net loss of $4.1m, or $0.37 per share, compared to a profit of $9.0m in the same period last year.

Analysts were looking for profits of $0.56 a share.

Overseas pressure

Revenues from the company's irrigation equipment business were down 5%, at $103.1m.

True, in the US irrigation revenues rose by 6%, "primarily due to revenues from acquired companies, including Elecsys Corporation," Lindsay said.

But overseas Irrigation sales fell by 24%, in part due to weakening overseas currencies.

"Excluding the effect of currency translation, international irrigation sales declined 15%, most significantly in Brazil and several export markets," Lindsay said.

Lindsay shares in New York were trading down 6.5%, at $73.63, in morning deals.

By Agrimoney.com

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