Small Caps | 1:04 PM
Nufarm’s guidance miss was largely due to two unplanned outages, now resolved, while record growth in Seeds more than offsets headwinds for Crop Protection.
- Nufarm warns of a miss to FY26 earnings guidance
- Crop Protection faces headwinds, but two unplanned outages will not be repeated
- Seed Technologies' growth greater than forecast, with more likely to follow-through
- Company is organising presentations to analysts and investors on Monday & Tuesday
By Greg Peel
Agricultural chemical company Nufarm ((NUF)) provided a rather disappointing trading update ahead of its Investor Days on 28-29 September.
FY26 (September year-end) underlying earnings guidance is for $370-380m, up 22-26% on FY25, but below consensus of $383.7m.
In the second half FY26, strong Seeds growth is being offset by weaker Crop Protection. An implied second half earnings growth rate for Crop Protection of -4.5% represents a deceleration on the first half’s 3% advance and compares to prior guidance of a second half growth rate ahead of the first half.
Management now expects flat FY26 growth. Consensus was for 10% growth.
In line with previous guidance, FY26 net debt to earnings is expected to be around 2x, down from 2.7x in FY25 and 3.6x at the first half FY26 result.
The improvement reflects strong cash generation from lower capex requirements and disciplined working capital management, Morgans notes, consistent with the company’s ongoing focus on deleveraging.
Crop Protection
Crop Protection softness was centred on North America, where US agricultural volumes are down, adverse forex headwinds and unplanned outages at manufacturing plants Wyke (UK) and Laverton (Australia).
Macquarie notes outages should be non-recurring with a reversal in FY27. North American headwinds will likely flow into the first half FY27 with ongoing pressure on US farmers’ margins due to Trump’s tariffs and the elevated prices of diesel and fertiliser due to Trump’s war on Iran, as well as pockets of dry conditions.
AgChem price pressure remains, Macquarie notes, with persistent Chinese oversupply.
Nufarm is focussed on higher-margin products within portfolio as part of a transformation plan, but hot and dry conditions in Europe are also likely to impact Crop Protection earnings in FY27.
Seed Technologies
Offsetting Crop Protection, earnings growth from Seeds is expected to be "strong" driven by Hybrid Seeds as well as an Omega-3 pricing recovery. The fish oil price out of Peru has stepped up by close to three-fold between the back-end of the first half to now, UBS notes, thanks to El Nino.
El Nino's other channel, beyond Australia, runs through Peru, where the first anchovy quota was cut -36% and only 25% was caught before the fleet was stood down on 10 June. In the 2023 El Nino, fish oil prices more than doubled.
Further, feedback from Nufarm's peers in the Seed space has been consistently positive both on the volume and price fronts. UBS forecasts Seeds earnings to reach $62m in FY26 versus $14m in FY25 and previous FY26 guidance of $40m.
Seeds is the higher-value segment, Macquarie notes, and outperformance here is positive from valuation standpoint, particularly strength in Hybrid Seeds.
The LatAm growth strategy is in early stages of execution and should drive robust Hybrid Seeds earnings growth.
Higher fish oil prices are also a benefit to Omega 3 revenue.
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE