The Nufarm Limited (ASX: NUF) share price was out of form last month.
The agricultural chemicals company's shares fell a disappointing 20.2% during November.
This made Nufarm the third-worst performer on the ASX 200 index last month behind only G8 Education Ltd (ASX: GEM) and Smartgroup Corporation Ltd (ASX: SIQ).
Why did the Nufarm share price sink lower in November?
Investors were selling the company's shares in November after it provided the market with an update on its first half results.
According to the release, during the course of reconciling accounts with German customers, Nufarm identified additional sales rebate claims from customers relating to its 2019 financial year.
Instead of restating its FY 2019 financial statements, management expects to make an adjustment in its first half FY 2020 earnings. While its investigation is ongoing, at this stage it is expecting a negative impact of A$9 million to its first half EBITDA.
Trading conditions remain tough.
Also sending investors to the exits was its update on trading conditions.
The release explained that trading conditions have continued to be difficult so far in FY 2020. This has resulted in lower earnings in all regions for the first quarter compared to the prior year.
One area performing particularly poorly was North America. Management advised that high channel inventories and substantially lower demand in the region has resulted in first quarter EBITDA of approximately A$20 million below the corresponding period. Unfortunately, this is unlikely to be mitigated in the second quarter.
As a result of its poor start to the half, management expects first half EBITDA to be "significantly lower than the prior year."
Should you buy the dip?
Analysts at Morgan Stanley appear to believe that this share price weakness is a buying opportunity.
According to the note, it has retained its overweight rating and $7.20 price target on the company's shares.
The broker remains positive on Nufarm despite its disappointing update. It believes its issues are temporary and investors should take advantage of the share price pullback. Especially given its massive Omega-3 opportunity.
