• Revenue: 4% below prior year.
• Underlying EBITDA: 29% below prior year.
• Underlying EBIT: 57% below prior year.
• Statutory Net Profit: $6 billion loss.
• Net Debt: $635 million, 25% below prior year.
• Net Leverage: 2 times EBITDA.
• Return on Funds Employed: 4%, 490 basis points below prior year.
• Operating Cash Flow: $472 million for financial year 2024.
• Inventory Reduction: $300 million or 20% year-on-year reduction.
• Capital Expenditure: $230 million for the period.
• Omega-3 Revenue: Reached target of $50 million.
• APAC Segment EBITDA: $88 million, in line with prior year.
• North America Underlying EBITDA: 49% below prior year.
• Europe Underlying EBITDA: 25% below prior year.
• Seed Technologies EBITDA: 15% below prior year.

• Warning! GuruFocus has detected 8 Warning Signs with ASX:NUF.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nufarm Ltd (ASX:NUF) achieved a 30% reduction in net working capital, significantly lowering net debt by 25% to $635 million.
• The company successfully launched new products, with new product introductions contributing to more than 15% of revenues.
• Nufarm Ltd expanded its omega-3 sales, reaching a target of $50 million, and entered an exclusive license for Yield10s omega-3 camelina technology.
• The company reported strong demand for its products in Asia, achieving growth in EBITDA and expanding 2,4-D capacity at Laverton.
• Nufarm Ltd is targeting $50 million in annualized savings in overhead costs by the end of financial year 2025, aiming to operate more efficiently.

Negative Points

• Underlying EBITDA was 29% below the prior year, and underlying EBIT was 57% below, indicating significant earnings pressure.
• The company reported a statutory net profit loss of $6 billion, impacted by idle plant costs and restructuring expenses.
• Price competition in North America led to a 49% decline in underlying EBITDA, negatively affecting margins.
• Licensing revenue decreased, and the company anticipates further declines due to changes in BP arrangements.
• Nufarm Ltd decided not to issue a final dividend for financial year 2024, reflecting financial challenges.

Q & A Highlights

Q: Can you discuss the outlook for the crop protection industry, particularly regarding pricing and excess production from China? A: Greg Hunt, CEO, explained that while there has been an increase in manufacturing capacity in China, Nufarm has reduced its footprint outside China, focusing on competitive sourcing arrangements. Prices have stabilized, and the outlook for 2025 appears better than 2024. Distributor inventories are low, and there is potential for upward price pressure due to low profitability among China-based manufacturers.

Q: How are you managing payables heading into the first half of FY25? A: Paul Townsend, CFO, stated that the relationship between inventory and payables is crucial. They expect to further reduce inventory, which will impact payables. The targeted 25-day reduction in inventory is expected by the end of FY25, with some movement in the first half.

Q: What is the outlook for licensing revenue? A: Licensing revenue was about $46 million, down from $55 million the previous year. Paul Townsend noted that this revenue is expected to decrease further next year, primarily due to the BP arrangements.

Q: Are there any implications from US tariffs on your crop protection business in North America? A: Paul Townsend mentioned recent duties on 2,4-D imports from China and India, which could benefit Nufarm's Australian manufacturing operations. While it's too early to speculate on broader tariffs, Nufarm is comfortable with its position and has flexibility in sourcing from advantageous regions.

Q: How do you view the potential for pricing discipline from Chinese manufacturers? A: Greg Hunt acknowledged that while Chinese manufacturers currently have low returns, Nufarm's reliance on China is decreasing with increased sourcing from India. The impact on pricing discipline remains uncertain, but Nufarm is well-positioned with its sourcing strategy.

Q: Can you elaborate on the cost reduction initiatives and their impact? A: Paul Townsend explained that over 50% of the $50 million annualized cost savings will come from headcount reduction, alongside process redesigns. These savings will not impact growth initiatives and will be reported transparently.

Q: What is the impact of softer near-term pricing on the omega-3 platform and seed revenue targets? A: Greg Hunt and Brent Zacharias noted that while fish oil prices have decreased, Nufarm is focused on scaling the omega-3 platform. The company is confident in long-term growth, with new varieties improving productivity and oil profiles.

Q: What is the outlook for 2,4-D demand in the US, considering recent duties and Dicamba availability? A: Greg Hunt stated that Nufarm has seen increased demand for 2,4-D due to recent duties and regulatory changes affecting Dicamba. While Nufarm doesn't have a license for over-the-top application on certain crops, it benefits from flexibility in supply and production.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.