Nufarm has reported a pre-announced loss of $456m but news of the first commercial sale of its new Omega 3 canola venture helped send its stock up 8.2 per cent to $4.50 a share.
The Omega 3 venture is the result of a long running collaboration between the company and the CSIRO which has undergone commercial trials for the last couple of years in the US.
Nufarm boss Greg Hunt didn’t give much away about the sale deal other than to say it was to South American fish farms.
Further details are due to be released in the next few days but all going well the Omega 3 trials present extraordinary upside for the company with expectations that in five years time it could be the company’s biggest earner.
This sale will be a few million dollars only but the fact the product is now commercial is the upside.
Fish oil is presently supplied by Peruvian anchovies, but the growth in fish production means there is a shortfall which the Nufarm product could fill the market upside running into billions of dollars.
Nufarm is also running trials using the oil in pharmaceuticals, looking at other ways to increase its potential. But for the moment the upside comes from fish farms.
Globally there is a million-tonne deficit of Omega 3.
The way Hunt looks at it, the single product could one day be as big as all of the rest of the company.
Last year’s earnings were, as previously disclosed, hit by droughts in Europe and Australia but with these broken business came back strongly in the second half which was also bullish for the market.
Revenue was flat at $2.8bn, but cash flow was up sharply at $195m for the full year – up from $80m a year ago.
Elsewhere, Nufam still has some issues with supply of raw materials for its locally produced glyphosate herbicide.
The Chinese government supports its production with tax rebates which provide a 9 per cent pricing differential which snakes it difficult for Nufarm to compete.
Glyphosate has run into issues in the US but still accounts for 50 per cent of the market in Australia and Nufarm is the only local producer.
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