Crop chemical and seed business, Nufarm, has squeezed a three per cent statutory profit rise from a year challenged by falling herbicide prices, drought in Europe and worldwide farmer reluctance to stock up on crop protection products.
Nufarm is also confident a looming German ban on sales of the popular broad spectrum herbicide, glyphosate, won't have much impact on earnings this financial year.
The prominent off-patent Melbourne-based farm chemical manufacturer reported an $111 million statutory profit after tax, from revenue of $3.5 billion for the year to September 30.
Seed technology products significantly bolstered the balance sheet with a standout 33pc jump in revenue.
The Nuseed division cashed in on rising demand for hybrid canola varieties in Australia, South America and Canada, and sorghum in Brazil and the US, plus emerging demand for Omega-3 canola.
Nuseed generated $98m in global earnings before interest, tax, depreciation and amortisation - $10m more than Nufarm's entire Australian and Asia-Pacific farm chemical business EBITDA.
Nufarm managing director, Greg Hunt, said while overall global trading would likely remain constrained in the first half of the new financial year, he tipped growth returning in the second half of 2023-24.
The company was on track to hit its $4.6b revenue goal for 2025-26, thanks to a transformed structure and an "increasing shift to innovation and differentiated solutions".
"This is a strong result on the back of a record prior period," he said.
Last year Nufarm's statutory net profit after tax jumped 65pc to reach $107m.
Mr Hunt was also upbeat about the growth opportunities ahead provided by the company's diverse portfolio, geographic reach, and potential for growth in its Omega 3 canola and bioenergy platforms.
However, he conceded global conditions had been challenging in 2022-23 due to widespread chemical channel destocking provoked by higher interest rates and customers anticipating falling active ingredient prices after COVID pandemic-related production costs and supply disruption subsided.
In Australia margins were squeezed by falling prices for glyphosate herbicide ingredient and historically low prices for another Nufarm staple, 2,4-D.
The company would temporarily stop 2,4-D production at its Laverton plant to upgrade the production line so it could sustainably cut production costs and take advantage of an expected price recovery during 2023-24.
Glyphosate sales in North America were also notably impacted in 2023-24 as customers moved to just-in-time purchases and waited for previously high values to decline, resulting in an overall revenue slide of 14pc for the region.
European revenue dropped 8pc due to drought conditions in southern Europe and the deregistration of some products which caused the loss of about $42m in sales.
However, Mr Hunt said the German agriculture sector's anticipated phase out of glyphosate sales this financial year was unlikely to have a material impact on Nufarm's future earnings.
The seed technology business had enjoyed its third year of double digit revenue growth, with EBITDA up 67pc after revenue grew 30pc in the sorghum category, 14pc in sunflowers and 20pc in hybrid canola.
"Every second acre of Australian hybrid canola is now planted to Nuseed varieties," he said.
He also noted the company's new Omega 3 canola variety would likely deliver up to $70m in revenue this financial year, fuelled by demand for oil processed into Aquaterra fish feed formulations and Nutriterra for human nutrition.
Despite current crop protection market pressures, Mr Hunt remained positive about the company's outlook.
He cited tight global grain and oilseed stocks-to-use ratios, attractive grain prices and ongoing strong demand for crop protection products.
He expected continued momentum in new crop chemical product launches, plus more robust growth in seed technologies, and an overall return to business growth in the second half of the financial year.
Nufarm will pay an unfranked final dividend of five cents a share - down on 6c a year ago - resulting in a total dividend of 10c for the 2022-23 fiscal year.
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).
