Australia’s spending gap on R&D is a travesty, according to Tesla chair Robyn Denholm

Tesla chair Robyn Denholm says research and development must be central to an economic strategy. Picture: Bloomberg

The Australian-based Telsa chair, Robyn Denholm, has underlined concern at slowing business investment saying “Australia is not living up to its full potential”.

The head of the government’s strategic review on research and development has backed widespread concerns over the perceived lack of focus on the issue.

Next week’s GDP numbers are expected to result in a downgrade of business investment after a fall in the March quarter.

Denholm earlier this month spoke at the Tanarra entrepreneurs and founders forum at Melbourne’s State Library, and said Australia’s performance across government and business since 2008 has slid to just 1.68 per cent of GDP compared with the OECD average of 2.73 per cent.

This is a spending gap of about $25bn a year for a country that relies disproportionately on small business for innovation and plainly doesn’t have the systems in place to support the translation and commercialisation of technology at scale.

“We need to see R&D as central to economic strategy, innovation as the engine of productivity, job creation and long-term security,” Denholm said.

Denholm, whose committee is preparing a report for the government, wants it to set a vision, supercharge R&D by supporting intangible innovation making it easier for big companies to play a role, train more people and bridge the gap between research and commercialisation.

The hope is Canberra takes notice and the government doesn’t confuse its stunning election victory as support for its meagre progress in its first term.

Seeds of doubt over Nurfarm direction

John Gillam has a couple of headaches with his dual roles as chair of Lendlease and Nufarm as he attempts to placate shareholder nerves. Nufarm’s stock price has hovered near 24-year lows and shed more than $500m in value in a couple of weeks.

At $5.78 a share, at least Lendlease’s stock is off its lows.

Nufarm says it is looking for new external equity to share the load as its seed technology empire takes shape. But key shareholders like Allan Gray and Tanarra, speaking for 34 per cent of the register, want Gillam to put the whole company on the auction block.

The immediate cause of the Nufarm slump was a half-year net profit of $38m, which missed consensus estimates by a staggering 41 per cent even though revenue at $1.9bn was just shy of estimates.

When a company misses forecasts by that level no one else is to blame but itself, even if there are some obvious reasons for the misses based on delays in reaching the forecast blue sky for seed technologies.

The core business is just fine and the Donald Trump tariffs are, on balance, good for Nufarm as Australian farmers are poised – in the wake of the tariffs – to exploit Chinese reluctance to buy Californian almonds, sorghum and other products.

One of the most multinational Australian companies, on paper there are more opportunities than challenges; it’s just that the red lights are flashing in the wrong areas.

At risk is the fate of the 69-year-old company which has played a key role for Australian agriculture and is the centre of the rationalisation of the ag-services sector.

Nufarm argues (again) that it is a classic case of being a victim of shareholders’ inability to see past a point in time to the long-term value inherent in its assets.

But shareholders have been burnt before and are bracing for more dilutive corporate action despite denials of imminent equity raisings.

They say bullish company talk covers for chronically mismanaged capital allocation which has left the company in its current position.

The big three, Allan Gray, Tanarra and L1 Capital, are holding on but argue the market has obviously lost faith in the company.

The global crop protection business is in the best shape it’s been for a few years and is going fine, but it is missing in parts of the seed technology business including omega 3 canola and carinata seed.

Both have easily explainable reasons for the current poor returns, including a collapse in fish oil prices due to a presumably short-term oversupply in anchovies (fish feed) from Peru, and some lingering European concerns about genetically modified crops.

The bulls say the latter argument is just about conquered and the Peruvian position is unsustainable.

The technologies offer solutions to some of the world’s biggest environmental problems – sustainable aviation fuel and omega 3 supplied without cleaning out global fish supplies.

On paper the upside is clear.

But the profit released on May 21 and talk of new equity partners sent the stock price down 41 per cent from $4.02 to $2.36 early this week.

With a market value now of under $1bn (down from $1.5bn just a couple of weeks ago), the company says that in a globally consolidating industry it needs some help to battle through the short-term issues in seed technologies

The stock stabilised a touch this week.

Still, two of its biggest shareholders – Allen Gray and Tanarra (including ART and HostPlus) – figure Gillam should just put the whole company up for sale because the market has lost faith.

Another large shareholder, Raph Lamm at L1 Capital (6.5 per cent), is not so sure.

Gillam by now is used to dealing Tanarra, given it is also a vocal shareholder in Lendlease.

The idea of selling part of the seed technologies business, according to shareholders came from them, but at the same time they are concerned Nufarm will simply have another equity raising which will dilute their holding.

Lamm is not so sure and Gillam argues it would be suicide to sell the company now at the bottom of the cycle.

Tanarra’s stake is managed by Vidhur Rangaswamy who started acquiring the stock last year believing it to be undervalued and not meeting its potential.

The sum of the parts valuation on some scores is over $4 a share and Morgan’s Belinda Moore’s valuation is at $3.27 – both well above present levels.

One fundamental everyone agrees upon is Nufarm is a classic Australian case whereby shareholders are being dictated to by a board which has next to zero skin in the game.

Nufarm has 382.9 million shares on issue and the non-executive directors hold just 443,608 shares or 0.001 per cent of the issued capital.

To his credit Gillam, who joined the board and replaced long-time chair Don McGauchie in 2020, has 260,000 shares in his own right or close to 60 per cent of the total holding of non-executive directors.

Chief executive Greg Hunt has just over a million shares but after 10 years in the job his days are clearly numbered.

Shareholders acknowledge now is not a great time to change leadership as there are doubts over just how much of the crop protection and seed technology business will be left to run.

But by year’s end the search will be on for a replacement.

Hunt, a veteran of the Australian agriculture market has, successfully restored stability, boosted the core crop protection business and pushed Nufarm into new technologies including Omega 3 canola and carinata seed.

After 10 years as boss, amid the present turmoil, due in large part to global commodity volatility, the case for a prolonged tenure is not good.

Hunt has built a strong management team including portfolio boss Rico Christensen and Asian Pacific boss Brett Sutherland, along with European boss James Barkhouse – all with impeccable global pedigrees – and head the list of internal candidates for Gillam.

But as one company seer has noted, Gillam has a few balls in the air and needs to ensure he doesn’t drop the glass one.

Mergers commissioner’s change all above board

The former enforcement commissioner and assistant mergers commissioner at the ACCC, Liza Carver, left the building on May 16, two years ahead of her allotted tenure.

One week later, she was back on the tools as a competition law partner with Herbert Smith Freehills, joining her old friend, Linda Evans, in Sydney.

Everyone involved stressed all the right protocols were in place to ensure no conflicts.