Release Date: May 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nufarm Ltd (ASX:NUF, Financial) reported a strong recovery in profitability from crop protection, with underlying EBIT up 34% year on year.
- The company achieved a 22-day year-on-year reduction in inventory, on track for a 25-day reduction by the end of the financial year.
- Nufarm Ltd (ASX:NUF) is expanding its biofuels platform, planning a threefold increase in carinata planting area in 2025.
- The company has formed new agreements with BP and Unilever to develop biomass oil, targeting sustainable oil production for biofuels and FMCG applications.
- Nufarm Ltd (ASX:NUF) is exploring alternative capital structures for its Seed Technologies to accelerate growth and maximize value.
Negative Points
- The omega-3 platform negatively impacted results, leading to a $28 million write-down of omega-3 inventories.
- Nufarm Ltd (ASX:NUF) finished the period with a leverage of 4.5 times, reflecting increased debt levels.
- The company reported a decline in underlying EBITDA by 6% year on year, and underlying EBIT decreased by 15%.
- North America experienced a 10% year-on-year decline in EBIT due to pricing pressures and a delayed season.
- The fish oil market saw a significant reduction in pricing, impacting sales and profitability for the Aquaterra product.
Q & A Highlights
Q: Why is Nufarm exploring alternative structures for Seed Technologies now, especially with depressed fish oil prices?
A: Gregory Hunt, CEO, explained that Seed Technologies requires more funding than Nufarm alone can provide as it moves to the next growth stage. Despite temporary oversupply affecting omega-3, the long-term demand is positive, and sophisticated investors may see the long-term value in the platform.
Q: What is the outlook for Nufarm's Australian business given the dry conditions?
A: Gregory Hunt, CEO, noted improved margins due to lower costs, but dry conditions have impacted trading since March. The rest of Asia remains stable, and Nufarm plans to prioritize the domestic market while exploring opportunities in North America.
Q: Is the current poor market environment in North America temporary, or is there a structural issue?
A: Gregory Hunt, CEO, stated that the market operates on a just-in-time basis, with uncertainty around tariffs causing cautious channel purchasing. However, with low channel inventories, Nufarm expects improved volumes in the second half.
Q: Can you provide details on the supplier financing utilization?
A: Brendan Ryan, CFO, confirmed that supplier financing was approximately AUD125 million, consistent with the previous year's position.
Q: How does Nufarm plan to address the 4.5 times net debt to EBITDA leverage?
A: Brendan Ryan, CFO, outlined actions to deleverage, including reducing CapEx, scaling back omega-3, achieving cost savings, and introducing new products. These actions are expected to bring leverage back to the target range of 1.5 to 2 times EBITDA by FY26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
