Good morning, ladies and gentlemen. My name is John Gillam. I am the Chair of Nufarm. Welcome to all of you to our 2025 Annual General Meeting, whether in the room with us or participating online. Our Company Secretary has informed me that we have a quorum present, and as such, I officially declare this year's Annual General Meeting open. I am chairing the meeting from our Corporate Support Centre and Manufacturing Facility in Laverton, Melbourne, and I am on the lands of the Bunurong people of the Kulin Nation, and I wish to acknowledge them as traditional owners. I would also like to pay my respects to their elders, past and present, and to Aboriginal elders of other communities who may be joining us today. The notice of meeting dated 13 December 2024 was made available to all shareholders. I propose to take the notice of meeting as read.
The online component of today's hybrid meeting is being facilitated by Computershare's online meeting platform. This allows shareholders, proxies, and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies can ask questions and submit votes. Before I turn to how to participate in this meeting, I would like to welcome my fellow board members who are in attendance today. With me today is Greg Hunt, our CEO and Managing Director. Joining us here in Melbourne are Marie McDonald, Lynne Saint, and Alexandra Gartmann. We have Federico Tripodi and Adrian Percy joining us virtually from the United States, where it's early evening for them. I'm sure you'll all understand that David Jones, who is based in Europe, is an acceptable apology since it's well after midnight for him.
In addition, Greg and I are joined in the room by Brendan Ryan, our Chief Financial Officer, Kate Hall, our Company Secretary, Grant Saligari, our General Manager of Investor Relations and Corporate Development, who will be moderating the questions from shareholders later in the meeting. This is Brendan's first AGM as Nufarm's Chief Financial Officer, and we welcome him to our team. We are also joined by Vicki Carlson, representing our auditor, KPMG, who is available to answer any questions in relation to the FY24 audit later in the meeting, and we have Michael Hutchison from Computershare, who will act as our returning officer. Before we move to the formalities, there are several housekeeping matters regarding how to participate in this hybrid meeting that I need to work through, so please bear with me.
For those attending the meeting online who wish to submit a written question, you may do so at any time during the meeting via the text bubble icon on your screen. Type your question in the chat box on the right of the screen and then select Send. Confirmation that your message has been received will appear above. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting, when I will also take questions from those in the room here. Your questions may be moderated, or if we receive multiple questions on one topic, I may choose to amalgamate them together. For those shareholders participating online who wish to ask a verbal question, an audio questions facility is available during this meeting.
Instructions on how to use this facility are shown below the broadcast window on the online platform. If you are asking a verbal question, please state your full name before asking your question. Please limit your questions to only one or two questions at a time and then rejoin the queue to allow others to ask questions. I do expect that we will be able to answer all your questions today. If we are not able to do so, we will answer them in due course via email or posting responses on our website. Depending on your questions, I will make the decisions whether I answer or will make a member of management, another director, or the auditor to respond. Voting today will be conducted by way of a poll on all items of business.
To provide you with enough time to vote, I will shortly open voting for all resolutions. If you are participating online and you are eligible to vote at this meeting, a voting tab is available. Selecting this tab will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a Submit or Enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. For those of you in the room, your voting cards will be collected once voting is closed. I now declare voting open. Please submit your votes at any time from now until the end of question time. I will give you a warning before I move to close the voting.
As I said, Michael Hutchinson, who's in the room from Computershare, will act as the returning officer for the purposes of conducting and determining the result of the poll, the results of which will be announced to the ASX later today. That deals with the administrative details of today's meeting, and I'll now move to my formal address. Welcome again, shareholders and guests, to Nufarm's Annual General Meeting for the 2024 fiscal year. Today, we have shareholders present both in person and online, so please bear with us as we ensure that everyone enjoys the benefit of full participation. I'm honored to chair an agricultural company with a unique Australian heritage, a strong global presence, and one where cutting-edge science, technology, and innovation are defining and driving long-term growth.
Each year, we are reminded of the importance of plant science and agricultural innovation to our prosperity and to human and environmental health. Nufarm's solutions in crop protection, aquaculture, human nutrition, and biofuels are making important contributions to solving global challenges like food security, human nutrition, and climate change, as well as supporting farmer incomes around the world. Our purpose is to grow a better tomorrow. We strive to use plant science to help agriculture produce enough food, feed, and fuel in sustainable ways that protect the ongoing needs of future generations. Our crop protection products mitigate the production risks faced by farmers from pests, weeds, and diseases, which helps ensure populations have enough food. Further, the contribution of modern crop protection products to sustainable farming practices, such as minimum and no-till cropping, and the contribution to farmer incomes around the world is an often overlooked fact.
Innovative solutions such as our Omega-3 canola are helping to reduce pressure on wild fish stocks in our oceans. Our Carinata is providing sustainable feedstocks for the rapidly growing biofuels industry as the push to decarbonize transport intensifies and initiatives to strengthen fuel security gain momentum. The synergies available from integrating our crop protection, seeds, and beyond-yield platforms linked with continued investment in innovation and technology are expected to drive long-term growth and strong shareholder returns. I'll now comment in detail on the financial year 2024. FY24 was a challenging year for the crop protection industry. It was a year in which the steps that we had taken in prior years to strengthen our business and our funding arrangements paid off. While the industry was under significant pressure, we were able to compete vigorously and at the same time continue to invest in innovation and growth.
We met our revenue target for Omega-3. In biofuels, we expanded the area planted to Carinata in South America and conducted important pre-commercial trials for Carinata in Europe and Australia. We continue to build on the success of our canola business in Australia. In 2024, every second hectare of canola grown in Australia was grown from a variety with Nufarm genetics. We are aiming to replicate our success in Australia as we expand our canola business in South America. Events around the world, ongoing conflict in several regions, and the threat of tariffs remind us of the importance of maintaining a sovereign manufacturing capability. During FY24, with the support of the federal government, we invested in upgrading and expanding our 2,4-D production facility at Laverton. This reinvestment is expected to bring long-term benefits through improved asset integrity and reliability.
Partnerships are an important part of the way we do business, and in 2024, we announced partnerships with KD Pharma to enhance our Omega-3 platform with Unilever in biomass oil, and our partnership with BP and Carinata continues to strengthen. Partnerships have and continue to play an important role in crop protection and allow us to innovate without the balance sheet commitments incurred by many of our larger integrated competitors. We are continuing to develop our biofuels business here in Australia. Building on the success of pre-commercial trials for Carinata in Australia in 2024, Nufarm intends to conduct upsized commercial trials in Australia this year. These commercial trials are the next phase in scaling a sustainable, locally grown feedstock for renewable energy while empowering farmers with new economic opportunities.
Australia's globally competitive agricultural sector is well placed to both drive and benefit from the development of a local renewable fuels industry. Australian farmers are already providing feedstocks to support the decarbonization of transportation in Europe, thanks to the incentives for bioenergy production and use available in the EU. Renewable fuels can play a critical role in Australia's energy transition, and I encourage government to continue to support the development of this important industry in Australia. At our FY24 result, we announced that we had accelerated actions to reduce costs, enhance working capital efficiency, and improve return on funds employed. These actions are aimed at strengthening our business so that we can better serve our customers and deliver superior financial performance. We will continue to invest in our growth platforms, which are important drivers of future value for our shareholders.
In considering our strategies, we carefully balanced the delivery of returns for shareholders in the short term with investing and growing our business to build value over the long term. In FY24, we made the difficult decision to not pay a final dividend. The decision was consistent with our capital management principles and reflects our priority on cash flow and debt management. As a result, we improved our financial resilience and created optionality for investing in growth. For FY25, we have made some small but important modifications to key management personnel, KMP, remuneration. Relative Total Shareholder Return, RTSR, and Return on Funds Employed, ROFE, are now the primary long-term measures for KMP performance, with ROFE replacing previously used revenue and margin targets. RTSR closely aligns management with the experience of our shareholders.
By improving ROFE, particularly in the more mature parts of our business, we free up internal funds to invest in growth. Further details of our remuneration approach can be found in our remuneration report. In closing, while our markets remain competitive, we have finished the first quarter of FY25 in a good position, which Greg will elaborate on in his speech. Our balance sheet is sound, our priorities are clear, and our teams are engaged to deliver on the objectives that we've set ourselves. The board is fully committed to delivering for our shareholders. On behalf of the board, I would like to thank all of our people for their unwavering dedication and commitment. We recognize the challenges they face, and their efforts in ensuring we meet our customers' needs are greatly appreciated. And to our customers, suppliers, and shareholders, thank you for your ongoing support for Nufarm.
I'll now pass to your Managing Director and CEO, Greg Hunt.
Thank you, John, and I add my welcome to everybody joining us today. Before recapping our performance in financial year 24, I'd like to set the context for our results. In early 2023, COVID-disrupted supply chains started to reopen, and customers in the crop protection industry reduced inventory. Initially, reduced rates of ordering from customers caused a backlog of inventory with crop protection suppliers such as ourselves. This excess inventory then led to elevated levels of competition among crop protection suppliers that continued through financial year 24. Nufarm was impacted by that competition, which was the main reason for our EBIT falling below the prior year and the company recording a statutory net loss.
With that context in mind, we were pleased to have reduced inventory and improved cash flow to have finished the period with net debt 25% below the prior year. We reported net leverage of two times EBITDA, which was a strong outcome during a period of cyclically reduced earnings. While revenue and profit in crop protection were below the prior year, we had some notable successes recording strong growth in revenue and profitability from crop protection in Asia, which is an important growth region for Nufarm. We also saw the benefits of investment in our crop protection product pipeline, with new product introductions contributing more than 15% of revenue. These additions to our portfolio are an important part of our growth aspirations. They address particular pain points for farmers and contribute to more sustainable farming practices.
An example is Nufarm's patented DropZone technology, which combines science and our formulation expertise to achieve more precise application, which limits drift and off-target impacts to the benefit of farmers, their fields, and their surroundings. Another example is the launch of Oxbow in North America, part of the Nufarm Phenoxy herbicide portfolio that is effective on weeds that have become resistant to other herbicides. Resistance is a major challenge to farmers in many key grain-growing regions. A final example is Nufarm's Carnadine, a broad-spectrum insecticide containing the active acetamiprid. And Carnadine has grown strongly, and it now replaces less sustainable competitor products. These products solve for challenges facing farmers, are differentiated, and are higher-earning products for Nufarm. In financial year 2024, we also continued to advance our seed technologies platforms, reporting another strong result in hybrid canola in Australia and delivering AUD 50 million of Omega-3 canola revenues.
Our 2024 Omega-3 canola crop showed an improvement in both grain yield and Omega-3 oil profile. We entered an exclusive license for Yield10's Omega-3 Camelina in July of 2024 and completed an asset purchase agreement with Yield10 in January of this year. The acquisition of Camelina assets provides an opportunity to further expand our Omega-3 portfolio with additional oil profiles and the potential to produce Omega-3 in winter Camelina as a cover crop. While still in the development phase, the technology and pipeline are expected to be synergistic to our existing research and development and established value chain to end-use markets. Carinata expansion was tempered by unseasonal wet conditions, late soybean harvest, and an inability to plant all of the contracted hectares in Argentina. We expanded in Uruguay, launched in Brazil, and validated performance in the EU and Australia with pre-commercial trials.
The inclusion of intermediate crops in Annex 9 of the EU's Renewable Energy Directive includes Carinata as one of the few scalable agricultural products to meet the criteria for sustainable aviation fuel mandates. I'd now like to comment on our initiatives to build a stronger Nufarm. At Nufarm's financial year 2024 result, I outlined several specific targets for cost savings and inventory efficiency. I can report that we are on track with these initiatives, and I'll provide more detail in our trading update shortly. These targets are part of our overall plan to improve our competitiveness and our return on funds employed. By improving our returns, particularly in the more mature parts of our business, we see the opportunity to shift capital to enhance the growth parts of our business. We can generate better financial performance and continue to support our growth strategies.
We are striving to improve all parts of our business and lift returns for shareholders. Management performance measures, which cascade well down into the organization, concentrate on EBIT, average net working capital as a percentage of sales, and return on funds employed. We also have strategic measures aligned to our growth objectives. We believe that these measures are central to driving improved financial returns, which in turn enable us to fund our growth platforms. These outcomes ultimately drive value for our shareholders.
Moving now to an update on current trading. Overall, we have made a pleasing start to financial year 2025. Demand for crop protection products has been strong, and although active ingredient prices have not moved materially, we are seeing the benefit of stability in costs of goods on crop protection margins. We expect to achieve AUD 100 million in Omega-3 revenue in financial year 2025, subject to market pricing.
We are well advanced in plans for planting Carinata in South America for our 2025 crop. Cost saving and inventory reduction initiatives that were announced at the 2024 results are on track. By the end of financial year 2025, we are aiming to achieve a 25-day year-on-year reduction in inventory. We have identified AUD 50 million of annualized cost savings. The full impact of these savings is expected to be realized in financial year 2026. At this time, we expect net working capital at the half year to be marginally higher than the prior year, mainly due to additional working capital for our Omega-3 platform and movements in currency. In closing, I'd like to thank our customers and suppliers for their ongoing support and loyalty. I am also extremely grateful for the dedication shown by our people.
Their determination and flexibility in a challenging global environment are truly inspiring and reflect our Nufarm brand and values. On behalf of the management team, I'd like to thank the board for their ongoing support and guidance. And to our shareholders, thank you once again for your continued support, your confidence, and your shared belief in the future value to be delivered from our business. And I look forward to providing an update on our first half performance in May. So again, thank you, and I'll now hand back to John.
Thanks, Greg. I will now move to the discussion on the formal items of business as set out in the notice of meeting. I remind you that the poll is open for voting, and if you have not already done so, I encourage you to vote now.
The notice of meeting contains all the material information in the board's possession to assist you in determining how you wish to vote. This includes the board's recommendation for shareholders to vote in favor of all resolutions. Mr. David Jones is standing for reelection, and his extensive skills and experience are detailed in the notice of meeting. As I mentioned earlier, it is well after midnight for David, so he has pre-recorded a message, which we will play for you now.
Thank you, John, and good day, everyone. I'm seeking your support to be elected for a second term as a non-executive independent director of Nufarm. In my introductory address to you three years ago, I summarized my career as an international executive in the agricultural industry with long experience in businesses large and emergent.
I also explained that my particular interest in joining your company is my conviction that Nufarm is competitively well-placed to grow its business through innovation. The industry has changed fundamentally in the last decade. We've seen a surge in activity from boutique science overtaking the traditional dominance of the major R&D-based companies. These startups offer unique opportunities for Nufarm. They need partners, they need funders, and they're eager to share their aspirations and achievements. Many are impressively innovative and quick to progress their ideas. This has opened a wide range of transparent programs for Nufarm to select and engage with. All these startups need the support of seasoned marketing companies in the ag sector like Nufarm who can carry them into global markets.
Meanwhile, the large R&D companies in agriculture are struggling to make R&D pay and have large top-line numbers, hard to grow with their own modest rates of portfolio refreshment. Three years on, innovation is now central to how we think about Nufarm's ability to win and to grow both its top line and to boost its business quality. In the last two years, the Innovation Committee, which I chair, has been reinforced with the appointment of two senior independent directors with outstanding experience at the forefront of crop protection and seeds genetics discovery, and with complementary geographical experience in the Americas and Europe. There have also been several seasoned management hires to Nufarm who are expert in matters of discovery and product development. The old paradigm of size wins, which has driven decades of consolidation in our industry, is looking increasingly threadbare.
Nufarm's acknowledged agility, good marketing, and scientific judgment presents great opportunity. Over time, innovation will deliver us returns which are more predictable and robust and will enable us to pull away from the disruptive impacts of cyclicality in our sector. I would appreciate your support to continue this work at Nufarm. Thank you very much.
Thanks, David. Now we move into the question section of the meeting. I will shortly take questions on all items of business in the order that they are submitted or on any general questions relating to Nufarm that you have. I encourage you sincerely to submit your questions via the online platform if you've not already done so. And as I mentioned earlier, the poll is open on all items of business. The proxy results for all items of business are now being displayed on the screen.
You can see that proxy voting indicates that all items are likely to pass today with strong support, and I thank shareholders for that. I will start with some questions we received from shareholders in advance of the meeting. And the first one was from Mr. Michael Conan-Davies. His question was, apart from wishing for price rises and cheaper input costs, what active and strategic measures are you taking to improve the share price? And thank you for that question. And as a board and senior team, we certainly understand where you're coming from. And I'd like to impress upon you that we're leaving no stone unturned in our efforts to improve financial performance in the short, medium, and the long term. In many parts of our business, we're making pleasing progress. And as we indicated in today's trading update, we're seeing improved margins in crop protection.
We have an amazing profile for canola in Australia that we plan to expand into LATAM, which is exciting. We're growing our Omega-3 and Carinata businesses, and there are areas where we have not performed to our expectations. In those areas, we have specific initiatives to improve performance, such as cost reduction and inventory reduction. This is on top of very strong working capital and cost disciplines in the year just gone, which Greg just spoke about, and maybe you want to elaborate a bit more.
Well, I guess, as we announced at our 2024 full-year result, specific initiatives for cost saving and inventory days. We are targeting AUD 50 million in cost savings to come largely from non-customer-facing activities, and I'll just point out that that in no way limits our ability to continue to invest in our growth platforms, and we're also targeting a 25-day year-on-year reduction in inventory.
We achieve that, that delivers about AUD 200 million, an additional AUD 200 million dollars in cash. And these initiatives are designed to make us more efficient as an organization. And as I reported in the Trading Update to date, today, these initiatives are on track, and I look forward to reporting further on our progress in half year. Yeah.
Thanks for the question. The thought I'd like to leave you with is we're leaving no stone unturned to make sure that we improve our performance. The second question we received prior to the meeting commencing was from Mr. David Loveridge. I hope I'm saying that name correctly. The incentives, his question was, the incentives of senior management need to be based on EPS increasing and debt either static or decreasing as a percentage of total assets. At present, the incentive scheme does not align with shareholders.
I'll take the second sentence of that question as a statement, and I'll point you to the comment that I made in my speech and maybe provide a little bit of additional information. How we construct our remuneration is an area of considerable discussion and thought around the board table. We have changed in recent time so that our two main performance measures, relative total shareholder return and return on funds employed, have been brought to the fore, replacing previous measures. Return on total, sorry, relative total shareholder return does capture the impact of EPS and the share price and very closely aligns us with the experience of shareholders. And return on funds employed reflects our efficiency in using shareholder capital.
And therefore, our belief is that we've created an incentive scheme that very closely aligns the interests of shareholders and makes sure that management are closely aligned to that as well. So hopefully that provides an answer to that question. Mr. Loverich asked a second question. He pointed out that there are two directors in the annual report that do not hold shares, and all directors, on accepting a position on the board, should purchase on-market shares to the equivalent of one-year directorship fees to show they align with shareholders. Your point is well made. You might see in our board charter that directors, when they join our board, have a minimum shareholding policy that they sign on for, and they have five years to accumulate shares to align with the policy. And I have no expectation that we will not be in line with the policy that we've appointed.
I'm sure that will address itself in the timeframe that we've outlined. So as we sit here at the moment, we are in compliance with the policy, and I expect that we will continue to be in line with the policy as the five-year window closes for those two directors that you've identified. We had a further question, sorry, we had a question from Mr. and Mrs. Verdy, and they asked, what are the reasons for the drop in share price and what actions are being taken to improve the share price in the near future? And thanks to Mr. and Mrs. Verdy for the question. As Greg covered in his report and those that follow the global crop protection sector and global agricultural markets know that the whole industry has been under tremendous pressure in the 18 months or so up to now, and we're not immune from that.
It's not an excuse. You can't outrun trends of that scale. What we have done is make sure that our balance sheet is strong, and the discipline and the effort that's gone into that is significant, and it's meant that we should be able to trade into faster recovery as the entire industry recovers, and that's our plan. We're not wishing for better results. We are leaving no stone unturned, as I mentioned, to make sure that every controllable that we have, we're exercising so that we're in the best position to enjoy improved trading, and hopefully that will be reflected in a better share price as those results unfold. That's the end of the questions in advance. Oh, no, was there? Sorry, the second page. So a couple more questions that have been typed in and come in before the meeting started. Firstly, from Mr.
Kevin Daley, with respect, his question is with respect to the Chicago Heights facility, which is south of Chicago in the U.S., obviously, and our exports to Canada. Is the imposition of tariffs by Canada likely to have much effect on Nufarm? Greg, do you want to?
I think as we mentioned at the start of the meeting, I mean, this is a very fluid situation. As of last night, the tariffs are on. As of this morning, they're off. I mean, if tariffs were to be implemented, one of the strategies that we have available to us is that we could do tolling in Canada. So I think that would be our response if the tariffs were put in place.
Mr. Daley's popped four questions through. That's the first. So we'll deal with him in order. Last year's annual report, second question.
Last year's annual report mentioned that Nufarm was installing a gas turbine for electricity generation at its Wyke plant. How is this progressing? I ask because the U.K. grid came very close to blackout territory on a windless evening in mid-January.
Yeah, on that one, correct. Wyke does have a gas turbine to generate electricity. And we're exploring the option to see if hydrogen is actually a sustainable option for us. And frankly, we're still working with the U.K. government on the needed infrastructure to see whether that's actually a viable project. But the significant investment in Wyke is really starting to show some good signs. And that's another area that is very encouraging for all of us. Well, it is. It's an important global asset for us. We make products there that are higher margin.
They're not exclusive to Nufarm, but we have leading positions in all of the phenoxy herbicides that we produce in Wyke. So very important facility for us.
I should have asked. I should have stated Mr. Daley's third question before I got you to talk about that. His third question is, why are some of Wyke's products so successful in China? Cheaper? More effective?
Well, I certainly wouldn't say they're cheaper. The products are MCPA, which is a herbicide, which we are the market leader in. And then there are some specialty herbicides, one of which I mentioned in my prepared remarks, which is Oxbow that we've launched in North America. That's very effective against weeds that have become resistant to glyphosate. And another interesting product is a product called Mecoprop, which is targeted at the green roofs market.
We're going to see, well, in China today, 30% of all new industrial buildings. It's mandated that you have to have green roofs. So one of the products that we produce allows you to put our herbicide on the mat that sits on the roof because if you didn't have that, clearly the roots would grow through the roof, and that wouldn't be a good outcome for anyone. So, I mean, that has probably been under a little pressure because, as most of you would know, the real estate market in China has or is and has been going through a difficult period for the last year or two. We expect that to turn at some point. For that particular product, we've applied to the EPA for registration in North America.
Again, for all of the products that we produce in Wyke, we see, well, we have the confidence to reinvest and continue to invest in the site because they are differentiated and higher margin products.
Thanks, Greg. Our last question from Mr. Daley, he noted that in the annual report, there are some aspirational revenue figures quoted for FY26. And he goes on to quote what they are. And he then says, "These seem to be very bold aspirations based on FY24 actual revenues, unless you take the view that FY24 is aberrational low." Clarification sought. I think I can answer that quite simply for you, Mr. Daley. We announced those aspirational targets in February 2022. At the time of the FY21 and then the FY22 results, we were quite close.
That does point to how aberrationally low the FY24 numbers were due to the fact that the sector, particularly crop protection, has been under immense pressure. The defrauding of European sustainable aviation fuel with used cooking oil, another factor. They're aspirational for a reason we use that word. We're aiming to grow our business. At the time we announced them, we were responding to calls from shareholders to provide some sort of view on where we saw things unfolding on a four to six-year sort of basis. Hopefully, they're the sort of numbers we're able to achieve. The focus is on returns, not revenue. I'll make that very, very clear. You can see that from our report. We've got a couple of questions in advance of the meeting from Stephen Mayne. I'll just praise his comments.
He thanks us for embracing the practice of disclosing our proxy position to the ASX. And he congratulates us for winning strong voting endorsement. He's also grateful that we have hybrids and we don't hold a premature AGM like other companies with 30 September balance dates. And his last gripe is that our disclosure required to match best practice is to embrace scheme-like voting disclosure with the poll today. We choose not to do so. It's not a majority. We're not in the minority. So it's not something we're doing. He then goes on with the Chair's comment on whether I support the principle the public company should release their full year results before the deadline closes for candidates to nominate for the board of the AGM. If some disaster unfolds in the annual results, shareholders need time to arrange changes to the board at the following AGM.
We follow this principle, but the majority of ASX 100 companies with 30 September balance don't. Can the chair guarantee that we won't switch to a rush pre-Christmas AGM? There's one question there. I'll deal with that first. You've got a long paragraph here, Stephen. I'll deal with a question on deadline for closing candidates. We follow the law. But more importantly, we follow a practice of having a good security of tenure and the right skills around our board table. And that latter point is much more important than the technical being correct with your process into the AGM. In relation to the next part of this paragraph, can the chair guarantee we won't switch to a rush pre-Christmas AGM? You might recall that we did have a rush pre-Christmas AGM, not by design.
We moved our balance, our year-end from the end of July to the end of September, but we kept our AGM at the same spot in December. That created an enormous amount of crunch and was very difficult for everyone. So we moved the AGM with ASIC support to the date that we're now holding it. That is much better for us. It is working much better for our team. It provides a more thoughtful trading update from the first quarter and a bit of line of sight on how January's trading. So I can't guarantee these things. You need to do what you have to do. But this is a much better date for our AGM. And we're very comfortable to commit to holding it unless something quite dramatically changes. Then we go on to the question of KMPs.
Stephen points out that when I was the chair of CSR, I was a non-KMP in annual report, and we only disclosed three. Could I comment on whether this aversion to pay disclosure is peculiar to him? No, it's not. The disclosure practice at CSR was in place before I became chair, and I just continued it. That disclosure was matched also by providing average pay details across key management. It's quite a different, and you've chosen to choose a quite narrow interpretation of what you can see in the annual report. What we do here is make sure that shareholders are informed. We'll continue to do that and follow the law without fear or favor. We think it's the right thing to do. With that, [crosstalk] Greg has a couple of additional questions from Stephen Mayne. Nope. No. Is that it from Stephen?
Or is there? I missed one in trying to summarise or I've run. I have one more late, well,
one further question from Mr. Mayne, which I'll read. The share price jumped more than 5% in the opening hour of trade, so investors were clearly pleased with the trading update. Which aspect of the update does the chair believe delivered most materially on the update, and how vulnerable? Well, that's a question. We go on. How vulnerable are we to any tariff or trade shocks which may come from the Trump administration? I'm also confused by none of the board who own the ASX listed Nufarm notes. That's the third subtype of question.
Okay. Let's just break this up and deal with the first one is about the trading update.
I've got no idea which part of the market interpreted it, and I'm not going to start trying to pick my way through that today, so it's nice that it kicked. We feel it should, but the more important part of your question on tariffs, we've already spoken about it. The competitive landscape for everyone's pretty much the same if you're selling a product that's coming from a country that's going to have a tariff. We do have a quite unique position in that we are both a manufacturer and a buyer of product that we are a trader, and our manufacturing assets are located here in Melbourne and in the U.K., not far from Leeds, and in a substantial facility in North America in Chicago Heights, another one further in the south, so we are in a position where the tariff impacts might be quite different to us.
How this is going to play out, it's very difficult to have any sense as the last 24 hours is indicating for all of us. So we just watch, and we'll respond in the best way we can.
And John, just in addition to that, I mean, in terms of products sourced out of China, we're as well placed as any of our competitors.
Okay. Thank you. And then the third question in this clutch from Stephen was about the step-up security rights. I don't know why my fellow directors don't hold them. I'm aware that some of longer-term management, some other management do hold them. They're entitled to as long as they follow disclosure rules. And so, yeah, it's.
There's a toll on completion. Would it make sense to replace it with less expensive bank debt? And what are our options if we want to take out?
They're good questions. They're things that management have an active management and the board have an active line of sight on. And it's not really a place to comment on those given that that's a quite sensitive issue.
One final question from Mr. Mayne, which we may need to take on notice. Did the CEO, Greg Hunt, summarise his past LTI grants since joining Nufarm in 2012?
I think we'll definitely have to take that one on notice. So we'll take that one on notice.
Yeah. Stephen, what you're asking is something that obviously, and you've said, "Please don't tell you to look it up online." Well, you can look it up online. And that's what a journalist would do if they were doing this sort of work. So to impose a cost on us for one shareholder is probably an unfair ask.
If you've got a specific reason for this, you're welcome to get back in touch. We'll deal with it in a fair and equitable manner. The matters you're asking are a matter for public record, and we've disclosed everything we're required to disclose. Every year, we've been required to disclose it.
Okay. That's the end of the online questions. Are there any questions from the floor? Please. If you speak nice and loudly, the microphone will pick it up.
You want me to stand up? Yes. Yeah. You're welcome to.
My name is Henry Stephens. I'm from the Australian Shareholders' Association. I've got two questions. Will the dividend be restored in the next dividend period given the company's leverage ratio is now two times, which is within the company's target range of one and a half to two times? That's the first question.
The second question is, when was KPMG first appointed? When was the current lead audit partner appointed? And when was the last competitive audit tender held?
Okay. Thanks, Henry, for your questions. And thanks for the continued work the Australian Shareholders' Association do for their members. On the dividend question, all I can simply say is we will follow our capital management policy. And in doing that, we will gaze forward in terms of what our demands on capital and our anticipations around trading are so that we don't have the situation where we might technically be able to declare a dividend, but when we look forward, it might be a more perilous circumstance to do so. And I'm not anticipating bad trading conditions. But at the time you're declaring a dividend, there's a bunch of things you have to follow. And your forward-looking position is important.
Our capital management policy is very clear. And it was well positioned on the back of a significant restructuring that we did 2021 into 2022. And we'll continue to follow that. On the audit questions, I don't know, Vicki, if you'd like to answer those, particularly your personal appointment and the length, then I'll answer the question on tenure.
I'm Vicki. I have been the auditor for approximately 17 years. The FY24 audit was my first year of signing as lead partner. And that's in accordance with the rotation requirements for every five years rotation of lead partner, as opposed [guess]
Right. A handy bit of paper, courtesy of the company secretary. Thank you. The last audit tender was 2005.
We've had significant change around the board table in that time, and in particular around the chair of our audit and risk committee and myself. And we have discussed that. And you might recall that there's been quite a few issues regarding some of the major firms. And when all that was going on, when we were coming onto the board, we decided we were best to stick to our knitting. And we're very happy with the services KPMG provided and the manner in which Vicki and her team go about their work. So we have no plans to change in the short term. And you're welcome to ask another question, Henry.
So it's a very long time since we had a competitive tender, 2005. So does that mean is there any thought from the board to bring about a competitive tender because it's such a long time?
Not at the moment. But there are much more important things for us to focus on in terms of driving improved performance, getting our share price back where we need it to go. And that's our priority. An audit tender is a large amount of work. What we do do is make sure that the fees are very competitive. And we ourselves have a good hard look at what's going on in like companies and make sure we think we're paying a fair price. That's part of just us making sure that our dollars are spent in a wise way. And being very clear on cost is one way of making sure that you've got something to help drive returns up. Thanks, Henry. Any more questions from the floor? Yes. Yes. Thank you.
Charlie Kingston from K Capital. Just like to make some comments, please, before I get to my questions. I suppose it is a bit of a follow-up to some of the previous questions around the share price. We are trading in a near GFC-type low today. If we look quickly back at the history of Nufarm in 2009, it was bought by Sinochem at AUD 12.
Sumitomo then bought a 20% stake. I think we actually placed that stake to them at AUD 14 per share, which was clearly a great decision. However, today, we're more than 70% below that price from 15 years ago at AUD 3.70, notwithstanding the small bounce after today's update. Now, soon after that placement with Sumitomo, the Chinese market, they flooded the market with supply. And we were forced to raise equity AUD 250 million at AUD 5.75 after the fall from the price that Sumitomo bought in.
But still much higher than where we are today. Of course, that's before Greg's time. Greg, you started as the CEO in 2015. Soon thereafter, we had another possible strategic owner in Nufarm, Liwah. Excuse my pronunciation. But they owned over 5% of the company, a Chinese supplier. Nothing eventuated from that. Of course, I appreciate that within Nufarm and the industry, there's a lot out of our control. As we've said, pricing and most of our products are off patents, the weather, of course, with anything agriculturally exposed. So it's clearly a volatile industry. But all the decisions that we do control, in 2017, we made an acquisition in Europe, so $500 million USD. Thankfully, we funded that acquisition by raising equity at AUD 7.50. It more than doubled the price that we trade at today. I suppose that was a good decision in hindsight.
So at least equity funded that. But then a year later, the drought struck, wet weather returned, and we had more debt than we would have liked. So we had to raise AUD 300 million in equity at AUD 5.85, again, much higher than where we are today. But somehow, our balance sheet was still stretched. And then a year later, we had to sell our South American business for over 12 times EBITDA, which was a great price. And our debt finally, I think we were the most shorted stock in the ASX at the time. But our net debt was about AUD 200 million post that sale. So that was good. But somehow, notwithstanding, COVID happened. But then we had two great years when we actually generated real free cash flow for those two years. Prices were strong.
But you have mentioned a few times that you think the balance sheet is strong today. But it's two times EBITDA that excludes the hybrids that you just suggested may be refinanced with actual debt. And that is the low point for the half. So my personal view is the balance sheet is not all that strong. We're not paying dividends. So I think you would probably agree. But just considering the history and how bad of an experience it has been for long-term Nufarm shareholders, I appreciate we've invested a lot in the omega-3 opportunity. But that always seems like it's two years away before we get any benefit. Same with sustainable aviation fuel. Just interesting to note the BP press today that they're pulling back on some of their sustainable aviation fuel aspirations.
But my first question, with all that context, ended up with the share price where it is today, AUD 3.70, which is over 70% below the price that Sumitomo paid. They did sell out at AUD 3.85. So I suppose that was good in hindsight for them. But do you think the business should actually have any gearing, given how sick the board is? Noting there's been lots of examples of ASX-related businesses, Elders, I think Greg used to work at. They nearly put up with the GFC, too much debt, etc. But do you think that the business should actually have any debt? And can you reassure shareholders that they might need to raise further diluted equity, given it always seems to happen in the worst of times? And clearly, there's a lot out of our control.
But the lower the share price goes, the more expensive the more diluted potential equity raise will be. That was my first question.
Thanks, Jared. Charlie? [crosstalk] Sorry, Charlie. Thank you. Let me deal with the last part. As we sit here today, our company and its financial position are strong relative to global peers. That's the basis on which we make that statement. And if you look back halfway through 2024 and you sort of pick a point where peers were reporting results, their gearing levels were four, six, some eight, some higher, tremendously under pressure.
And the work that Greg and our then CFO, Paul Townsend, led and the board strongly supported to restructure the debt in the manner that it's now structured and come up with the capital management structure we had gave us the position that we were able to trade through a very, very difficult period and come out of it with a balance sheet in good health. Do we need debt? We have to fund our working capital or else we wouldn't be able to trade. And we wouldn't have. So we've got to have debt with a good structure. And we think the stress test of the last 18 months or so has shown us that the structure we put in place is doing a good job. I made a point in my speech that we weren't happy to not pay dividend.
But it's a sensible thing for us to do to preserve cash until we're very clear that there are improved conditions and to prioritize growth because more earnings on the PE we have will result in a higher share price. And that's the reality. None of us are happy with the share price where it is at the moment. And your history lesson is a good reminder of why we should be unhappy. And it's our job. And as I said earlier, leave no stone unturned to address that. Do we need to raise funds? Absolutely not. Absolutely not. We can fund our growth ahead of us through all the measures that we have in front of us and the capital that we've got today to do that.
Thank you. And then second question, just around those aspirations and the revenue target, FY26, AUD 4.5 billion in revenue.
I'd just like to hear your thoughts more around the actual earnings potential of the business as opposed to the revenue. And just a comment. For any business, I don't particularly like EBITDA, especially with all the accounting changes that have happened and it's rent and property leases, etc. So especially for a capital-intensive business like Nufarm, which is all that relevant to be fair, NPAT at minimum or free cash flow, which you do actually disclose in your presentations, which is great. But that's the only real thing that you can pay dividends from and pay down debt. And given all the investments we have made, Omega- 3, etc., I was just, yeah, hoping to get if we do hit that AUD 4.5 billion in revenue, again, looking back over, say, the past 10 years, I think our NPAT on the line, so that's adjustments.
But if you take that as fair, NPAT margin was 3.5%, which we pegged at. So if we hit AUD 4.5 billion, that's going to be more than AUD 160 million. And based on the market cap today, that's around about nine times PE, which for a heavily cyclical business that doesn't seem all that impressive, which I would hope you can achieve better. And our dividends per share, they peaked at AUD 0.13 in 2017 based off the share price today, an unfranked yield of 3.5%. I think that's sort of our peak earning capacity. That is pretty underwhelming. But I would just, yeah, appreciate it. I know you've got the revenue target. You said that was in response to investors wanting something more. But what can this business [guess] actually deliver to shareholders?
Because revenue is one thing, and I suppose Charlie, you said with the lease and that's shrinking is one thing, but you're shrinking your business in that. You can't bring another company into this discussion of the AGM. So you've made a lot. Companies chase revenue. You've made a lot of statements. Let me just work through a couple of them. Firstly, an industry practice globally is to report EBITDA. So that's the main number we highlight. But we report other measures because we use other measures. And all of our incentives are based on EBIT, which is, we believe, much more relevant. And if I had a magic wand, I would be reporting EBIT and having all the peers report EBIT, but you can't change how peers report. And the industry trades data based on EBITDA, such is life.
But that's not the measure we use. You can see that in our Rem reports. And you can see that that's the reason why we disclose other items. We are very mindful that the things that we have invested for growth in, our growth platforms in seeds and some of the growth inside our innovation in CP has to deliver. If it delivers to the levels that we hope it can, we will have strong earnings into the future years. It's very hard as a public company to make any more statements than that. You're starting to provide forecasts, and we don't have the certainty for that. There are a lot of factors. So as I mentioned earlier, we're very strongly focused on making sure there's no stone unturned to deliver better results for shareholders. We are not happy with how things are standing at the moment.
But the executive team are doing a very good job controlling costs. They've done a fantastic job relative to peers on working capital. They have even stronger ambitions on working capital again. That's real dollars saved in interest that are material going forward, both for this year's result and bigger the year after. So they're doing the things that they can do to make this business far more efficient. If we're then able to convert our growth investments into meaningful earnings streams, that will leverage those earnings across the full company into stronger results. And as you can see from the change from a couple of years ago to now on our senior executive incentive schemes, the focus is on returns and relative TSR. Very strongly focused on that. So earnings. You've got a revenue target. You're not going to. We haven't got a revenue target. We provided revenue aspirations.
That's very, very different. And we can't provide an earnings target.
Okay. So no sort of mid-cycle earnings target. That's okay. And then third, maybe I'll ask around that remuneration points. I respectfully disagree that that is aligning with shareholders' relative TSR. We go down less than the market on the revenue we're going to.
Well, Charlie, just before you go further on this, a couple of years ago, we had a different structure. And half of our shareholders voted against it. Now, half who voted for it are people who are going to say exactly what I know you're about to say, that you would like different targets. But as a public company, you cannot have the proxy advisors recommending a vote against you. So we've moved to something where some of the major shareholders just shrug their shoulders and go, was, that was , John.
We actually really liked what you had before. But we understand you've got to have the proxy advisor. So we just have to live with what the playing field demands of us. So we had all of the proxy advisors' support this year. And we've got strong support for it's about a 98% vote for. And that's where we are. And as a public company, that means we're spending the least amount of time on this topic and creating the least distraction for management and the board so we can focus maximum time on running this company better and growing it more strongly.
That's fine. But I was just going to say maybe I don't know what the proxy houses would say if you actually had an absolute TSR target. I'm sure they would be in favor of that because I think.
Well, I'm not sure that's correct.
But maybe it is. But I'm sure you're experienced, Shannon, so you hopefully know. But if you haven't.
Well, it's not just me, Charlie. Marie McDonald is a very experienced director. She handles the discussions with proxy advisors directly. It's not an easy topic. And our TSR is something they have an absolute lightning rod for. I don't know if you want to add anything further.
No. No. Just we're sort of strike a balance between having an external measure, our TSR, and the internal one, the ROFE one, trying to address the both counts interest groups. And that's where we've come out. So I think that for us at the moment, and according to shareholders' advisor, it seems to be strike a balance.
It's just more of a comment. But I'm sure if you introduced an absolute shareholder share price target,
I'd be baffled if shareholders were against that.
If we're against shareholders, shareholders would have. Mr. Mayne pointed to some CSR history. I did do that for one year as Chair of CSR. And I think I've still got ten fingers. But it's a difficult response.
On an absolute basis, that would be fair to shareholders who have seen 70% reduction in share price since 2012.
Yeah, points well made on that, and we're very determined to address that for the benefit of all shareholders.
Thank you, and then just the final question regarding my history lesson, but Nufarm has always been speculated as a takeover target. And clearly, at the moment, the listed market isn't paying up. And to be fair, it's certainly not. Nufarm is not alone in that. Anything cyclical, the market doesn't really like paying up for, especially anything agricultural related.
But given the history of Sumitomo, Sinochem and various other shareholders, is that something the board is investigating potentially selling the company to a larger party? Because it does seem like the only time that agriculturally exposed companies get a fair price, whether it be Tassal or Regis, Midway is a small company to name a few, the only time that they actually get a fair price for their shares is when they do get taken over.
And clearly, there's been a lot of history with Nufarm. There's been a lot of consolidation with DuPont, Monsanto. That's another issue.
But we are now arguably a much smaller player in a much bigger industry where the big players do dominate. So maybe that's more of a structural issue. But just noting your history with CSR, that was a great outcome.
Shareholders, Greg, I think, used to work in private equity. And we've seen PE take over a lot of costs that are getting moved. I think they sold them, but they're lower again. But again, another ag company that's paid a better price by private equity. But if we do continue to languish at 370 or whatever price that really is below, I'm hoping you would think it's fair value. Is it something that you are pursuing actively as a board to test the market to see if somebody in the private market would pay a better price than the listed market will?
Charlie, every public company can be taken over. We all know that.
We are of a firm belief that if we are able to execute to the best of our ability all the things that we can do with all the businesses and investments we own, that will generate the best outcome for shareholders. And that is our priority. Thanks for your questions. Do we have any questions online? Yeah. No. There's none on the phone or on whatever the dial-in facility. I don't know if it's called a phone anymore. Yes, Henry.
Just one last question. Just about the net working capital, you've reduced it 30% in 2024, which is a huge reduction. I'm just wondering, why has it taken such a long time to make that action? That tells me that the net working capital position has been mismanaged in the past. So I'm just wondering, have I got something wrong there?
Why did you suddenly do it last year, not many years before?
That's a difficult judgment on the prior years. Greg, I don't know if you want to make some remarks on that.
I don't want to take away from the efforts of the team to reduce. But you've actually got to have a look at what happened during COVID and post-COVID. You had a large inventory build. We saw prices increase 25%-30%. Then once supply chains opened, we saw the market give all of that back. In an environment where the market was short, we had the inventory, we were able to reduce those. We had a bit of a, let's say, we had some favorable tailwinds.
But again, in terms of the discipline that we put in the, I don't want to take away from the disciplines that we've got in the business. So in addition to that, the favorable market conditions were actually a tailwind for us. And frankly, if we go back further, 2016, 2017, from memory, our average net working capital sales was about 45% or 46%. And it was always our target to get to between 30% and 35%. And I think we now have the discipline and the systems through the cycles that we will manage our working capital to exactly that target. And I think to the point that was made, when we look at our management incentives, there are no incentives in the business in terms of the senior management team that focuses on revenue. It is EBIT, return on funds employed, average net working capital.
And then there are some strategic initiatives depending on what the specific objectives are in our region. And that's 25%, 25%, 25%. In terms of the average net working capital, it's 25% of short-term incentives for 150 people, what we call the SLT, through the business. So that's where the focus is.
I just want to remind everyone, thanks for that, Greg. At the end of question time, I will be closing the poll. So please submit your votes if you've not already done so. Any more questions from the floor? Any more questions online? Okay. So there are no questions online. There's none on the floor. Then we've answered all questions submitted before us during the meeting. Thank you, everyone who's participated today. That now concludes the discussion on the items of business and all matters we need to cover in our meeting today.
And I will now formally close the poll for the meeting. I've already voted. [crosstalk] Yeah. Yeah. So you don't need mine. Michael's just doing a quick run around to collect up the cards. How many have you actually got scribbles on them, Michael? Just out of interest. Oh, I mean, leave that to me up front[crosstalk]. Any more cards to be handed in? All right. The final poll results will be released to the stock exchange and posted on Nufarm's website later today. And on behalf of the board, I'd like to thank you all for participating in today's AGM and coming out to Laverton to be with us. The meeting's now closed. And thank you. Happy to have a chat with you over a cuppa. Thanks all.