Another 25 per cent plunge in global herbicide prices in the past year has eroded Nufarm's statutory net profit almost 70 per cent in the first half of 2023-24 to $49 million.
However, farmers should anticipate crop chemical prices to climb back to more typical industry values by summer, based on the Australian farm chemical manufacturer's market expectations.
While Nufarm's fast maturing seed technology business enjoyed a 23pc earnings lift, the company's total crop protection operations in Australia, Asia, North America and Europe suffered a 40pc hit to earnings before interest tax depreciation and amortisation (EBITDA) for the six months to March 31.
Group revenue for the period finished 10pc down on the same time last year at $1.7 billion.
After a COVID-related price leap in 2021-22 when supply chain bottlenecks and production delays prompted farmers and distributors to stock up, the past 18 months have seen the global farm chemical sector overweight with inventory.
Sluggish demand for fresh product and destocking drives by farm inputs suppliers sent prices diving from record highs in 2021 to record lows this year.
Nufarm has tipped inventory imbalances to return to normal levels by 2025, noting its own inventory stocks were now 20pc below March 2023 levels.
However, with stockpiles still well above average in Brazil and much of Europe, Nufarm managing director, Greg Hunt, said supplies of off-patent products from China were still being diverted into other markets, including Australia, and continuing to undermine prices.
There was good reason for the business to be optimistic, with some key herbicide prices already rising, but he expected the crop protection market to stay "subdued" for a few more months before Nufarm ended its second half achieving year-on-year earnings growth.
Nufarm predicted full year earnings of $350m to $390m, achieving about 25pc mid-point growth in the second half compared to the same time last year.
However, despite that second half growth the company would report about a 16pc decline on last financial year's underlying EBITDA and 17pc less than the record year in 2021-22.
"We are never satisfied with a decline in earnings, but that result would be a very solid outcome in the context of the challenging conditions faced by the industry," Mr Hunt said.
"Despite the challenges, Nufarm has delivered a solid result for the first half.
"Our balance sheet position is strong, our debt financing provides significant flexibility ... we have no near term refinancing requirements and minimal financial covenants associated with our facilities."
He said regardless of the big destocking and price discounting trend across the farm chemical marketplace, Nufarm's crop protection business had performed well, actually growing its total sales volume and setting itself up well for a stronger demand environment.
Favourable seasonal conditions in eastern Australia and growth in Asia had already resulted in stronger chemical demand and normalisation of inventory levels.
However, declining global prices for key products, particularly 2,4-D, had eroded sales and margins, so revenue at $459m was 16pc below last year.
North American revenue was down 6pc to $679m despite strong volume growth, while the European market was down 18pc to $498m, hurt by wetter than average seasonal conditions eroding sales volumes and the lower prices.
On the other hand, Nufarm's seed technologies business grew revenue 11pc to $231m, primarily in Australia and South America, but revenue from seed treatment products suffered from the customer destocking squeeze.
Nufarm increased sales of its omega-3 canola products in Chile, and North America and expanded commercial contracts with growers to support expected sales growth of the niche canola oil in the aquaculture and human nutritional markets in 2025.
"We have a strong growth outlook for our base seeds, omega-3 and biofuels platforms, and are reaffirming our omega-3 revenue guidance at $50-$70m in 2023-24," Mr Hunt said.
"Plantings of omega-3 canola in 2024 support our ambition to more than double revenue from these products in 2024-25."
Nufarm's new carinata oilseed crop for the sustainable aviation fuel industry was expanding in Argentina and Uruguay and being farmed in Brazil for the first time.
Carinata was the focus of a large event in Florida to showcase the 2024 US crop to airlines, transport companies and US policy makers in March.
Mr Hunt said despite challenging current conditions for the crop protection sector, the outlook for the medium and longer term was healthy.
Nufarm remained committed to reaching its 2025-26 revenue aspirations of up to $3.9b in revenue for chemical products and $700m for seed technologies.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
