Nufarm (ASX:NUF) shares are likely to come under pressure today, with multiple brokers downgrading the stock in the wake of its full-year result - UBS and BoA Merrill Lynch both downgraded the company to sell, amid concerns about the company's debt levels. Nufarm's net debt increased by $165mm to $635mm in FY2013 due to working capital issues. We see a turnaround in cash generation taking longer as a result, UBS told clients. Overall we see net debt remaining above $600m through FY15, implying net debt to EBITDA remains elevated at >2x and EBIT / Net interest cover continues to be thin at around 3-3.5x. BoA Merrill Lynch said Nufarm faced significant growth challenges including a fall in soft commodity prices, rising global grain stocks, increased competition and higher debt levels. J.P.Morgan analysts retained their neutral rating but said the result increased the risk of an equity raising.
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