Nufarm shares surge on bullish seed technologies outlook

Investors have welcomed Nufarm’s full-year results, and the bullish outlook for its fast-growing seed technologies.

Nufarm managing director Greg Hunt. Picture: Yuri Kouzmin

Shares in farm chemicals and seeds company Nufarm surged on Wednesday as strong growth in its emerging seed technologies business helped to offset the impact of softer sales of crop protection products amid a “very challenging” second half.

The company reported underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $438m in the 12 months to September, down 2 per cent from the previous year, but towards the upper end of its guidance downgrade in September.

Revenue was down 3 per cent to $3.5bn, while statutory net profit was also 3 per cent lower at $111m.

Nufarm managing director Greg Hunt described it as a “strong” result after a record previous year.

“The results across the business demonstrate the value of our geographic and our segment diversity,” he said.

“As results across the industry demonstrate the second half was very challenging for crop protection.

“Our result in seed technologies was a stand-out with strong growth in the our core seeds business and an increased contribution from our omega-3 and bio-energy growth platforms.”

Nufarm’s crop protection sales fell 6 per cent, but double digit growth in sorghum, canola and sunflower sales helped to deliver a 32 per cent increase in revenue within its seed technologies business, which it is looking to expand through its emerging omega-3 and biofuel products.

Nufarm expects its Aquaterra product – a fish-free omega-3 oil produced from canola - to deliver $50m-$70m in revenue in fiscal year 2024, and for that number to double the following year amid a tightening of wild fish catch quotas globally which has sent fish oil prices higher.

Meanwhile, the company’s foray into biofuel is also expected to drive future growth, with the company looking to ramp up plantings of its Carinata cover crop product globally on the back of a 10-year supply agreement with bp.

Nufarm expects its seed technologies business to contribute $600m-$700m towards its revenue target of $4.6bn by fiscal year 2026.

Closer to home, Mr Hunt said the company was taking a “cautious” approach to the upcoming summer and winter seasons given the uncertainty surrounding the impact of the El Niño weather pattern.

“All the indicators are certainly a smaller summer crop, which is relatively immaterial for us anyway, and a smaller winter crop,” he told analysts in a briefing following the results announcement.

“We are taking a more cautious approach to the level of raw materials that we’re bringing into the country for the winter crop.

“But if you look back at El Niño events over a number of years, El Niño doesn’t necessarily equal drought - certainly not what we saw in 2019, 2020.”

In its outlook for FY2024, Nufarm said trading was likely to remain challenging in the first half, as the industry “adjusts to a lower level of input cost and prices”.

In a note to clients UBS analyst Evan Karatzas described the result as “solid”, estimating a small earnings increase in FY2024.

“Solid overall result, with earnings broadly flat amidst well known challenging industry conditions reflecting the improved resiliency of the Nufarm business,” he said.

Nufarm will pay a final unfranked dividend of 5c, down from 6c a year earlier. That takes its full-year dividend to 10c, flat from a year earlier.

The company’s shares were trading 10.8 per cent higher on Wednesday at $4.93.