* Dry weather saps demand for herbicide, fertiliser
* Nufarm writes down domestic business, swings to loss
* Result augurs badly for Australian agriculture sector
* Nufarm shares halted pending capital raising (Recasts, adds management and farmer quotes)
By Tom Westbrook and Colin Packham
SYDNEY, Sept 26 (Reuters) - Australian crop protection company Nufarm Ltd reported an annual loss on Wednesday as a severe drought cut domestic sales, prompting it to slow down production, write down its business and launch a capital raising.
Nufarm’s woes augur badly for other firms exposed to Australia’s rural sector, which is struggling through the driest conditions in decades across the country’s east. The company said a recovery was likely in 2019, but this would depend on a return to “more average conditions” by winter.
Australian farm conditions have worsened since Nufarm issued a profit warning in July, with wheat production cut to its lowest in a decade, the wool clip set to drop and weather forecasters offering no relief in sight.
The country’s east coast has recorded less than a fifth of its typical rainfall over the last three months and farmland there is bone dry, with winter crops failed and graziers buying in grain to feed their herds.
“In important cropping regions in eastern Australia we have experienced the driest conditions in some hundred years,” Nufarm Chief Executive Officer Greg Hunt told analysts on a conference call.
Without viable harvests to protect, farmers had no use for the company’s products, especially herbicides, he said, leaving inventory stuffing warehouses and store shelves and creating a backlog that must be cleared before the products expire.
Australian and New Zealand sales fell 10 percent.
The slowdown prompted the company to discount future earnings from the Australian division, booking a A$91.5 million ($67 million) impairment charge, which pushed it to a A$15.6 million loss for the year to July 31.
That compares with a profit of A$114.5 million last year. Nufarm last reported an annual financial loss in 2011.
Nufarm also cut its final dividend by a quarter and announced a A$303 million capital raising which it said was necessary to shore up its balance sheet, because it counted capital tied up in inventory as debts.
Its shares were not trading while it conducted the capital raising.
Meanwhile, the company has been cancelling raw material orders and working its herbicide plants at “minimal levels of activity,” as farmers wait for rainfall, said Chief Financial Officer Paul Binfield.
“Next year I will need fertiliser but I won’t have any money now until December 2019,” said John Hatty, a grain farmer in Tocumwal, some 700 km (480 miles) south west of Sydney.
“I planted a 1,000 hectares of wheat this year but I don’t expect to harvest anything.”
$1 = 1.3748 Australian dollars Reporting by Tom Westbrook and Colin Packham in SYDNEY; additional reporting Ambar Warrick in BENGALURU; editing by Richard Pullin