Nufarm’s profit downgrade commendable, say analysts as it faces crop protection challenges

After forecasting modest growth, the crop protection and seed company has downgraded its profit 4 per cent on consensus estimates.

Nufarm chief executive Greg Hunt said the company was on track to deliver is FY26 “revenue aspirations”.

Crop protection and seeds company Nufarm has downgraded its full-year profit forecast amid a “challenging operating environment” but analysts have praised the guidance as “commendable”.

The company is expecting to deliver underlying earnings before interest, tax, depreciation and amortisation of $430m to $430m. This compares with its previous forecast of delivering modest growth on last year’s result of $447m.

But chief executive Greg Hunt said the company was on track to deliver is FY26 “revenue aspirations”.

“We expect to deliver another good result for FY23, following on from the record earnings result delivered in FY22. Despite a very challenging operating environment, we have seen the benefits of revenue diversification across the group, with some softness in crop protection offset by a very strong performance in seed technologies,” Mr Hunt said.

Leverage will be within the range of 2.1 to 2.4 times earnings. Mr Hunt said, as inventory reduced during the period. “However, this was more than offset by an increase in receivables due to the phasing of sales.”

Nufarm shares eased 0.2 per cent to $4.27 on Thursday, valuing the company at $1.8bn, against a flat broader market.

Wilsons analyst James Ferrier said: “Notwithstanding favourable currency movements versus the prior corresponding period, Nufarm’s updated earnings guidance implies a commendable result in an environment of peer downgrades and reports of elevated channel inventory as resellers and distributors normalise ordering patterns.”

Mr Ferrier is reviewing his market weight rating and 12-month share price target of $6.04 for Nufarm.

Citi analyst William Park had a buy rating on the company with a $6.90 target price. But he said the challenging conditions in crop protection could linger in the near term.

“Weakness in crop protection for Nufarm is the key culprit for this which is consistent with commentaries from its peers,” Mr Park said. Uncertainty surrounding crop protection could continue to weigh on Nufarm.