Why Is Nufarm’s Leverage Rising Despite Strong HY25 Earnings?
Nufarm Limited reported a 3% revenue increase and a 17% rise in underlying EBIT for HY25, driven by strong crop protection volumes and improved cost management. However, net debt climbed 12%, pushing leverage to 4.5 times, highlighting ongoing financial balancing acts.
- 3% year-on-year revenue growth led by crop protection
- Underlying EBIT up 17% to $120.6 million
- Net debt increased 12% to $1.56 billion, leverage at 4.5x
- Capex surged to support seed technologies and growth
- Company focused on improving profitability and reducing leverage
Strong Revenue and Earnings Growth
Nufarm Limited, a global player in crop protection and seed technologies, unveiled its half-year results for HY25, reporting a modest 3% increase in revenue to approximately $1.81 billion. This growth was primarily driven by a robust recovery in crop protection volumes and a favourable shift in product mix, alongside improved cost of goods sold. Underlying earnings before interest and taxes (EBIT) rose 17% to $120.6 million, reflecting operational efficiencies and a more favourable market environment.
Rising Debt and Leverage Concerns
Despite the positive top-line momentum, Nufarm’s net debt increased by 12% year-on-year to $1.56 billion. This rise was largely attributed to funding requirements for the omega-3 business segment, timing of capital expenditures, and foreign exchange translation effects. Consequently, net leverage climbed to 4.5 times underlying EBITDA, a level that may raise eyebrows among investors. However, excluding the impact of omega-3 and currency fluctuations, adjusted leverage stands closer to 3.8 times, suggesting some underlying financial resilience.
Investment in Growth and Innovation
Capital expenditure surged significantly compared to prior periods, reflecting Nufarm’s commitment to expanding its seed technologies portfolio and enhancing plant health, safety, and environmental standards. While this elevated investment supports long-term growth ambitions, management anticipates a moderation in capex intensity in the second half of FY25 and into FY26, which could ease cash flow pressures.
Strategic Actions and Market Outlook
The company is actively pursuing measures to improve profitability, enhance free cash flow, and reduce its balance sheet leverage. These efforts come amid a backdrop of normalising market conditions in crop protection and ongoing challenges such as regulatory approvals, geopolitical uncertainties, and currency volatility. Nufarm’s leadership remains cautiously optimistic but acknowledges that several external factors could influence the trajectory in the coming months.
Investor Engagement and Transparency
Nufarm’s HY25 results were presented via webcast and teleconference by senior executives, underscoring the company’s commitment to transparent communication with investors and analysts. The detailed disclosures, including non-IFRS measures and forward-looking statements, provide a comprehensive view of the company’s operational and financial position, albeit with the usual caveats around market risks and uncertainties.
Bottom Line?
Nufarm’s HY25 results highlight solid operational progress shadowed by rising leverage, setting the stage for a critical focus on debt reduction and sustainable growth.
Questions in the middle?
- How will Nufarm manage its leverage amid ongoing omega-3 funding needs?
- What impact will regulatory and geopolitical risks have on the company’s growth trajectory?
- Can capex moderation translate into improved free cash flow in the second half?
