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Plant Impact sees signs of ag price recovery boosting profits hopes

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Is the downturn for ag groups such as spray, seed and machinery manufacturers drawing to a close?

One of the sector's smaller members, Plant Impact, offered hope that the recovery in crop prices, which helped make many among of the top investments of 2016, was seeding improvement in prospects too for farm input groups.

"Recent improvements in the global soybean price," combined with stability in Brazil's currency, "provide an improving foundation" for the Plant Impact's fortunes in the 2016-17 Brazilian growing season, said the group, whose chief executive, John Brubaker, is speaking on June 15 at the Agrimoney Investment Forum in London.

The comment, while still somewhat reserved in its optimism, represents among the most sanguine yet for a sector badly hit by the dent to farm spending from the crop price weakness which prevailed until early this year.

Groups including industry giants such as Deere & Co, the maker of John Deere machinery, and seeds giant Monsanto have cut profits hopes - with some companies issuing multiple profits warnings.

Tricky market

Brazil has proven a particularly tough market, with the weakness of the real last year, in reducing the affordability of imports, being cited by the likes of agrichemicals groups FMC Corp and Syngenta for profits warnings.

However, Plant Impact - which said its comments followed "extensive market research" into prospects for 2016-17 – added that the brighter conditions had led it "to anticipate a significant promotional campaign" for its key Veritas product.

Veritas, being distributed in Brazil as an additive of a Bayer spray, aims to boost yields through encouraging flower retention.

Market reaction

However, Plant Impact, whose products are designed to boost farm productivity by enhancing crops' own capabilities, said its revenues for the February-to- April period had slipped to about $500,000, from some $600,000 a year before.

Sales were "adversely affected by the weak European agricultural market and reduced business from the Middle East," the group said.

Nonetheless, Plant Impact shares nudged 1.0% higher to 52p in London.

London broker Peel Hunt - retaining a "buy" rating on the stock, with a target price of 70p – said that the statement was "in line with expectations".

Plant Impact's deal with Bayer, and a distribution agreement with Aysta over a cocoa product, "provide the company with the opportunity to build material revenue streams in two global crops," said Peel Hunt analyst Charles Hall.

By Mike Verdin

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