Company Reports

Our AUD 7.70 fair value estimate for no-moat Nufarm stands. That’s despite the agricultural innovator downgrading fiscal 2024 earnings guidance in a trading update. Our fiscal 2024 underlying net profit after tax forecast declines 30% to AUD 52 million or AUD 0.09 per share. But the time value of money is an offset, and we see no implication for our midcycle estimates. Nufarm still anticipates strong revenue growth in fiscal 2025.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrializing markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrializing markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

Agricultural innovator no-moat Nufarm forewarned of challenging fiscal 2024 first-half conditions during its fiscal 2023 earnings release in November 2023. It confirmed the industry was still dealing with an overhang of inventory and higher cost of goods, with margins pressured, in February 2024. But we underestimated crop protection headwinds—group fiscal first-half underlying net profit after tax fell 64% on the previous corresponding period to just AUD 51 million. We expected a 23% fall to AUD 110 million. Price pressures hurt revenue and margin, with industrywide inventory destocking featuring. Seed technologies was the one bright spot.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrializing markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

Agricultural innovator no-moat Nufarm forewarned of challenging fiscal 2024 first-half conditions at the time of its fiscal 2023 earnings release. It has now confirmed this was so for the first quarter at least, with the industry continuing to deal with inventory overhang and higher cost of goods, with margins pressured. But it expects a return to growth in the second half and our fiscal 2024 earnings per share forecast is unchanged at AUD 0.35. A reduction in input costs and favorable seasonal conditions are expected to lead to improved crop production and, as a result, crop protection in the second half. We keep our AUD 7.70 per share fair value estimate.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrializing markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

No-moat Nufarm shares jumped more than 10% intraday of its fiscal 2023 result. The market was seemingly buoyed by earnings resilience in the face of El Nino and confirmation the Australian agricultural innovator remains on track to meet fiscal 2026 revenue aspirations of more than AUD 4.6 billion. Fiscal 2023 revenue declined by 8% to AUD 3.5 billion and underlying net profit after tax fell 8% to AUD 122 million. However, there were positive elements, particularly from seeds and omega-3 canola, which renewed belief in the fiscal 2026 target and moved focus away from potential unfavorable weather patterns and normalization of recent historically high agricultural commodity prices.

Our AUD 7.70 fair value estimate for no-moat Nufarm stands, despite the Australian agricultural innovator announcing it expects fiscal 2023 underlying EBITDA to be within a range of AUD 430 million to AUD 440 million—about 14% below our prior forecast on a like-for-like basis. That is a disappointing decline on fiscal 2022’s AUD 447 million, despite the company previously guiding for modest underlying earnings growth, assuming normal seasonal conditions. But one season does not a company make.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrializing markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

We make no change to our AUD 7 fair value estimate for no-moat Nufarm. The Australian crop protection business hasn’t provided an update to the outlook since release of the fiscal half-year results in May 2022. At that time, it reported a 120% increase in underlying first-half fiscal net profit after tax to AUD 133 million, but said industry conditions were highly favourable and that there was likely to be some easing in agricultural commodity prices from elevated levels. It expected the normal seasonal skew of earnings to the fiscal first half to be even more pronounced than the 67:33 half-to-half split in fiscal 2021, due to the extraordinarily favourable fiscal first half. We retain our assumed 71:29 half-to-half underlying EBITDA split for fiscal 2022. And our fiscal 2022 EPS forecast is little changed at AUD 0.36.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrialising markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer-service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's 16% investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

We maintain our AUD 7.00 fair value estimate for crop protection company no-moat Nufarm. While we’ve sharply reduced our fiscal 2021 (12 months to September) EPS forecast by 50% to AUD 0.20, the driver has limited implication for longer-term projections. We have simply slowed the pace of assumed operating cost reduction. Our fiscal 2022 EPS forecast is little changed at AUD 0.53.

We make no change to our AUD 7.00 fair value estimate for no-moat Nufarm. The company had a disappointing fiscal year to July 2020, with underlying EBITDA in continuing businesses down 21% to AUD 236 million. But this was a year of perfect storm for Nufarm. While the company’s products are essential inputs to the agricultural industry, and therefore somewhat resilient to COVID-19, related supply chain disruptions improved, though are still net unfavourable, while weather conditions overshadowed. But improvement is at hand.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrialising markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer-service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's 16% investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and for food from rapidly industrialising markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer-service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's 18% investment in Nufarm endorses the quality of its global distribution. Collaboration will broaden product portfolios and add distribution in Asia.

We make no change to our AUD 7.00 fair value for no-moat Nufarm. The company’s balance sheet is in great shape, the severe one-in-100-year Australian drought has eased and embedded earnings improvements are on the way. The glyphosate litigation against Bayer in the United States was an unwelcome overhang on sentiment for Nufarm and others and was settled in June for USD 10.9 billion. This doesn’t guarantee protection from future potential litigation for Nufarm but will regardless improve sentiment. And Nufarm’s transformative Omega-3 rich canola is on the cusp of first commercial sales.

We make no change to our AUD 7.00 fair value for no-moat Nufarm. The company reported an underlying first half fiscal 2020 net loss of AUD 85 million, in line with our expectations. Nufarm makes the vast majority of its earnings in the fiscal second half planting season and this year will be no different. There is no interim dividend.

Our AUD 7.00 fair value is unchanged. Nufarm has guided for first-half fiscal 2020 group EBITDA of AUD 55-65 million, 12%-25% below our prior AUD 74 million estimate, and 43%-52% below the previous corresponding period, or pcp. But another quarter’s worth of unfavourable climatic conditions does not a fair value make, and Nufarm generally makes the majority 70% of its earnings in the fiscal second half. In fiscal 2020, we anticipate a far higher 85% portion of earnings will be made in the fiscal second half due simply to the first half being so weak.

Our AUD 7.00 fair value estimate is unchanged. That despite Nufarm disappointing the market with a lacklustre performance for the first quarter of fiscal 2020. The company notes a continuation of difficult trading conditions, including lower earnings from all regions versus the previous corresponding period, or pcp. This includes higher channel inventories and lower demand in North America resulting in EBITDA from the region being approximately AUD 20 million below the pcp. Nufarm flags an additional AUD 9 million EBITDA hit due to sales rebate claims from German customers, embarrassingly missed in the prior fiscal year. While the earnings implication is modest, it regardless doesn’t sit well with a market already jittery around inventory builds in more recently acquired European businesses, ongoing drought, and glyphosate cancer link fears. Nufarm shares declined 18% intra-day.