Seed Technologies’ 71% EBIT Drop Puts Nufarm’s Growth Strategy at Risk

Mixed Financial Performance Reflects Sector Challenges

Nufarm Limited’s half-year results for 1H25 reveal a company navigating a complex agricultural landscape. The statutory net profit after tax (NPAT) fell to $29.8 million, down from $49.2 million in the prior corresponding period, which had benefited from a one-off deferred tax asset recognition. On an underlying basis, NPAT declined 24% to $38.5 million, while underlying EBIT dropped 15% to $102.7 million, weighed down primarily by weak omega-3 oil margins and increased overhead costs.

Despite these headwinds, the company’s crop protection segment demonstrated a robust recovery. EBIT surged 34% compared to the prior year, buoyed by improved pricing stability for active ingredients and volume growth, particularly in Europe and the Asia-Pacific region. Europe’s underlying EBIT nearly doubled, reflecting a return to more normal trading conditions after industry-wide destocking. APAC also saw a 34% EBIT increase, although Australia’s dry conditions dampened sales. North America lagged slightly, with revenue down 2% and EBIT 10% lower, but showed signs of inventory and working capital improvements.

Seed Technologies Under Pressure Amid Omega-3 Challenges

The seed technologies business, however, faced a starkly different reality. Revenue stood at $249 million, but underlying EBIT plummeted 71% to $15.9 million. This decline was driven by lower licensing revenues, diminished margins in omega-3 oils due to a significant fall in fish oil prices, and reduced canola sales in Australia impacted by dry conditions. While canola, sorghum, and sunflower seeds performed solidly, the omega-3 segment’s struggles weighed heavily on profitability.

In response, Nufarm has initiated a comprehensive review of its Seed Technologies portfolio. This business encompasses a profitable hybrid seeds platform, two large-scale technologies in commercial ramp-up, and a pipeline of emerging innovations. The company is exploring various ownership and commercialisation structures to unlock value and accelerate growth, with UBS engaged to assist. No decisions have been made, and the outcome remains uncertain.

Strategic Initiatives and Outlook

On the innovation front, Nufarm marked several milestones, including new product registrations across Europe, North America, and Australia, and collaborations with partners such as KingAgroot and Hort Innovation. The company is also advancing bioenergy initiatives, notably with carinata production in South America and research agreements with bp, Unilever, and CSIRO on biomass oil technologies.

Looking ahead, Nufarm remains cautious. The company anticipates a $20 million EBITDA shortfall in Seed Technologies for the second half if fish oil prices remain weak, and no longer expects to hit $100 million in omega-3 revenue for FY25. Crop protection faces uncertainties from US tariffs, weather variability, and market conditions. Management is focused on cost reduction, targeting $50 million in annualised savings by year-end, and continuing inventory improvements.