Nufarm’s Rising Debt and Profit Slump Signal Challenges Ahead

Financial Overview

Nufarm Limited’s half-year results for the six months ended 31 March 2025 reveal a mixed performance. Revenue edged up 3% to $1.81 billion, propelled by volume growth in its Crop Protection segment. However, profitability took a hit, with statutory net profit after tax falling 39% to $29.8 million and underlying net profit declining 24% to $38.5 million. The profit contraction was largely driven by significant inventory write-downs in the omega-3 product line, reflecting ongoing fish oil price weakness, alongside increased operating expenses.

Segment Performance: Crop Protection vs Seed Technologies

The Crop Protection business showed resilience, delivering a 34% rise in EBIT to $126.5 million. This was supported by improved market conditions, volume growth across Europe and APAC regions, and stabilising active ingredient prices. Europe led the recovery with a 17% revenue increase and a near doubling of EBIT, while APAC posted modest revenue growth despite dry conditions in Australia. North America lagged slightly with a 2% revenue decline and a 10% EBIT drop, though volume growth and improved cash flow were noted.

Conversely, the Seed Technologies segment faced headwinds, with EBIT plunging 71% to $15.9 million. Lower licensing revenues, reduced margins in omega-3 due to fish oil price declines, and weaker canola sales in Australia weighed heavily. Despite these setbacks, the company advanced several initiatives, including new product registrations in Europe and North America, and ongoing bioenergy projects in South America and partnerships with bp, Unilever, and CSIRO.

Balance Sheet and Cash Flow Dynamics

Nufarm’s net debt increased to $1.36 billion, up 12% year-on-year, reflecting a seasonal and strategic build in working capital and sustained investment in plant, equipment, and intellectual property acquisitions, notably from Yield10 Biosciences. The company reported a net operating cash outflow of $459 million and investing cash outflow of $148 million for the half. Despite the higher leverage ratio of 4.5 times underlying EBITDA, Nufarm maintains significant liquidity through revolving credit facilities and unsecured notes, with a focus on financial resilience.

Dividend and Capital Management

In line with its capital management policy prioritising free cash flow and balance sheet strength, Nufarm’s board declared no interim dividend for this period. The policy ties dividend payments to free cash flow generation and target leverage ratios, which currently remain elevated due to the company’s investment phase and working capital requirements. The company continues to pursue a performance improvement program targeting $50 million in annualised cost savings by the end of FY25.

Strategic Outlook and Risks

Looking ahead, Nufarm acknowledges uncertainties including ongoing fish oil price volatility, weather impacts, particularly dry conditions in Australia, and trade policy risks such as US tariffs. The company expects Seed Technologies EBITDA to remain under pressure in the second half, potentially $20 million below prior year, and has revised down its omega-3 revenue expectations for FY25. Management remains focused on cost control, inventory reduction, and advancing product pipelines, including proprietary herbicides and precision agriculture collaborations.