Why Did Nufarm’s Profit Plunge 39% Despite 3% Revenue Growth?
Nufarm Limited reported a 3% revenue increase to $1.81 billion for the half-year ended March 2025, driven by Crop Protection volume growth. However, net profit after tax fell 39% amid fish oil pricing pressures and higher operating costs, prompting the board to withhold an interim dividend.
- 3% revenue growth to $1.81 billion driven by Crop Protection volumes
- 39% decline in net profit after tax to $29.8 million due to omega-3 inventory write-downs
- Underlying EBITDA down 6% to $205.9 million; underlying EBIT down 15% to $102.7 million
- Seed Technologies EBIT plunges 71%, offset by strong Crop Protection EBIT growth
- No interim dividend declared; net debt rises to $1.36 billion with leverage at 4.5x
Financial Overview
Nufarm Limited has released its half-year financial results for the six months ended 31 March 2025, revealing a mixed performance amid challenging market conditions. The company posted a 3% increase in revenue to $1.81 billion, primarily driven by volume growth in its Crop Protection segment. However, profitability took a hit, with net profit after tax declining 39% to $29.8 million, reflecting significant pressures in its omega-3 inventory valuations and rising operating expenses.
Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 6% to $205.9 million, while underlying EBIT dropped 15% to $102.7 million. The decline was largely attributed to net realisable value adjustments on omega-3 inventories due to sustained weakness in fish oil prices, alongside increased sales, marketing, administrative, and research and development costs.
Segment Performance: Crop Protection vs Seed Technologies
The Crop Protection business demonstrated resilience, delivering a 34% increase in underlying EBIT to $126.5 million. This growth was supported by improved market conditions, volume gains across all regions, and stabilising active ingredient prices. Europe led the charge with a 17% revenue increase and a near doubling of EBIT, while APAC showed modest revenue growth and a strong EBIT uplift. North America experienced a slight revenue decline and a 10% EBIT drop but made progress in inventory and working capital management.
Conversely, the Seed Technologies segment faced a steep 71% decline in underlying EBIT to $15.9 million. This was driven by lower licensing revenues, reduced margins in omega-3 products due to fish oil price falls, and weaker canola sales in Australia amid dry conditions. Despite these setbacks, the company advanced several initiatives, including new product registrations, partnerships for bioenergy feedstock development, and expansion efforts in markets such as Norway and the USA.
Balance Sheet and Capital Management
Nufarm’s net debt increased to $1.36 billion, up 12% year-on-year, with leverage rising to 4.5 times underlying EBITDA. The increase was driven by seasonal working capital build and ongoing investments in plant, equipment, and intellectual property, including acquisitions from Yield10 Biosciences. The company reported progress in working capital efficiency, with a 7.9 percentage point reduction in average net working capital to sales ratio, supported by inventory reductions and improved receivables and payables management.
Reflecting a cautious approach to capital allocation amid earnings pressure and elevated leverage, the board declared no interim dividend for the period. The dividend policy remains aligned with free cash flow generation and balance sheet targets, emphasizing financial resilience and investment in growth opportunities.
Strategic Initiatives and Outlook
Nufarm continues to pursue a performance improvement program, incurring restructuring costs and inventory write-downs related to its Seed Technologies carinata and canola programs in North America. The company is on track to deliver $50 million in annualised cost savings by the end of FY25 and aims to reduce inventory days by 25 days year-on-year, excluding omega-3 impacts.
Looking ahead, management remains cautious. The ongoing weakness in fish oil prices is expected to reduce Seed Technologies’ second-half EBITDA by approximately $20 million compared to the prior year, and the company now anticipates omega-3 revenues below the previously targeted $100 million for FY25. Crop Protection showed improvement in the first half, but uncertainties around US tariffs, trade policies, and weather conditions, particularly dry spells in Australia, pose risks to the second half.
Despite these challenges, Nufarm is advancing product development and market expansion efforts, including a new proprietary herbicide for Australia, registrations of key products in Europe and North America, and collaborations on precision agriculture technologies. Partnerships with bp, Unilever, and CSIRO in bioenergy research further underscore the company’s commitment to innovation and sustainability.
Bottom Line?
Nufarm’s H1 results highlight resilience in Crop Protection but underline significant headwinds in Seed Technologies, setting a cautious tone for FY25’s second half.
Questions in the middle?
- How will Nufarm manage the ongoing fish oil price weakness and its impact on omega-3 inventory?
- What progress is being made on the $50 million cost savings target and performance improvement program?
- How might trade policy uncertainties, especially US tariffs, affect Crop Protection volumes and pricing in H2 FY25?