After posting a $456 million loss last year Australia's homegrown farm chemical and seed technology multinational, Nufarm, has big hopes for its expanding Nuseed division and a turnaround in European crop protection sales to get itself back in the black.
Funds from the recent $1.2 billion sale of its South American operations are being funnelled into high value commercialisation of Nuseed's Omega 3 canola and new-age Carinata biofuel and livestock feed oilseed crops.
"Our resources are now based on segments and markets where we believe we can generate better cash returns," said managing director, Greg Hunt, pointing to a "significant focus" on lifting margins in Europe where Nufarm had made "significant investments" in recent years.
Improving seasonal fortunes already look to be helping European and Australian chemical demand.
Overall revenue was up almost 50 per cent in October and November compared with drought ravaged sales figures in Australia and weather-disrupted European demand for the same months a year earlier.
Between July 31 and November 30, a period which Mr Hunt said was traditionally the company's quieter trading window, Nufarm enjoyed a $159m revenue lift.
Management is very conscious of the unacceptable result in 2020 and we are taking action to improve performance- Greg Hunt, Nufarm
A wave of buying activity prior to Europe's second coronavirus lockdown helped lift European sales 86pc in October and November, while Australian demand for herbicide underpinned a 59pc lift in Asia-Pacific revenue to $127m.
North America's sales were also better - up 18pc to $129m for the period.
However, it was a contrite Mr Hunt and Nufarm chairman, John Gillam, who fronted the company's December annual general meeting to acknowledge last financial year's results did not meet expectations of the board and management.
"Management is very conscious of the unacceptable result in 2020 and we are taking action to improve performance," Mr Hunt said.
Shareholders regarded the result as unacceptable, too.
Almost 20pc voted against the board's remuneration report.
Mr Hunt said management was focused on improving volumes, margins, cash generation and return on assets.
"We have actions in play to grow market share in the key crops and markets where we believe we have strong relevance," he said.
He said Nuseed was set to deliver an increasing contribution to shareholder value in coming years, with initial Omega-3 canola oil sales in September followed by new customer deals months later.
Commercial sales and a multi-year offtake agreement have also been locked in for the Nuseed sustainable oilseed cover crop Carinata, which is being promoted as a source of renewable fuel and one of the lowest carbon feedstocks available.
"Our recent modest investment in Carinata is showing pleasing early potential," Mr Hunt said.
"The contribution from these new technologies will drive future revenue."
However, Nuseed earnings growth in the short term was more likely to come from its canola, sorghum and sunflower hybrids.
Meanwhile, to streamline processing costs and save up to $15m a year in Europe, Nufarm was pushing ahead with closing its fungicide production line in Melbourne and 2,4-D herbicide plant in Austria this year.
With reduced costs and ongoing supply chain improvements to strike the right balance between "optimising sourcing costs and maintaining reliable supplies to customers", management expected $20m to $25m in savings across the business by 2022.
"We are working to reduce our cost base to improve margins and provide a buffer against unforeseen headwinds," Mr Hunt said.
In the US it had opened a new formulation plant in the Mississippi and in Britain improvements were being made to its phenoxies plant to make products more cost competitive.
Chairman, Mr Gillam, addressing his first AGM after joining the board six months ago, said processes and systems which supported high quality performance at Nufarm had to be enhanced.
Although it had faced something of a "perfect storm" of poor weather conditions in 2019-20, Nufarm had not responded well enough with what could have been done to ride out the tough season.
"That was a hard lesson learnt, and we have to be better than that, and we will," said Mr Gillam, who replaced 17-year board veteran, Don McGauchie.
"I sincerely look forward to quickly restoring stronger performance.
"There is impressive industry knowledge and expertise across Nufarm's senior management team and employees.
"Actions that are underway to better leverage and support these attributes will help achieve stronger commercial outcomes and better serve the needs of customers."
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