Hello, welcome to the Life Sciences Virtual Investor Forum. On behalf of OTC Markets and our co-host, Zacks Small Cap Research, we are very pleased you've joined us. The next presentation is from Nufarm. Please note you may submit questions for the presenter at any time. You can also view a company's availability for one-on-one meetings by clicking Book a Meeting. At this point, I am very pleased to welcome Rico Christensen, Chief Executive Officer of Nufarm, which trades on the OTC Markets under the symbol NUFMF and on ASX under the symbol NUF. Welcome, Rico.
Thank you, Lily. Good morning and good afternoon, thank you for taking the time to join us here today. With me today, I have our CFO, Brendan Ryan, who will assist me in the Q&A session later on. Today, I will provide a brief overview of Nufarm, our first half FY 2026 performance, the progress we are making against our strategic priorities, and the actions we are taking to improve earnings quality, cash generation, and returns. The key message is that Nufarm has strong foundations, a clear strategic focus, and is making good progress in shifting the business toward higher margins, stronger free cash flow, and more disciplined capital allocation. Before we begin, please note the important notices in the presentation, including those relating to forward-looking statements and non-IFRS information.
Our comments today should be read together with those notices and are subject to market conditions and the risks outlined in the presentation. For those less familiar with Nufarm, we are an ASX-listed agricultural technology and crop protection company with more than 100 years of history. We operate across two segments, crop protection and seed technologies. The business has 11 manufacturing facilities, nine innovation and R&D centers, approximately 3,500 employees, and generated AUD 3.4 billion of revenue in FY 2025. The important point is that Nufarm has solid foundations, established market positions, and meaningful growth opportunities, but we are now applying a sharper focus to where we allocate capital and how we improve returns. Turning to the first half result, Nufarm delivered a strong performance, with underlying EBITDA up 18% and underlying NPAT up 35% on the prior corresponding period.
Revenue was lower, reflecting a deliberate shift away from lower-margin volume and toward higher-margin products. That shift is visible in the result. Gross profit increased 7%, gross margin expanded, and earnings quality improved. We also made good progress on cash flow and leverage, with free cash flow improving by AUD 193 million year-on-year, and leverage reducing by around 20%. The first half result also shows delivery against the priorities we set out for FY 2026: cost and capital discipline, profitable growth in crop protection, and delivery of the reprioritized seed strategy. On cost and capital discipline, operating expenses were held flat, CapEx is on track to be below AUD 200 million for FY 2026, and leverage reduced materially. In crop protection, earnings grew 6% in constant currency, supported by improved product mix and cost discipline.
Hybrid seeds continued to grow, emerging platforms improved as we reduced cash cost and strengthened the bp partnership. At the segment level, crop protection delivered underlying EBITDA of AUD 223 million, up 6% in constant currency. The result reflects our deliberate strategy shift. We are reducing exposure to lower-margin products, improving mix, and simplifying the business to support better margins and lower costs. Hybrid seeds delivered underlying EBITDA of AUD 62 million, up 7%, and remains our highest margin segment. Growth is being supported by new product launches and expansion in attractive Southern Hemisphere markets. Emerging platforms also improved with disciplined investment, progress in Carinata through the expanded bp offtake agreement, and lower cash cost in omega-3. The crop protection pipeline remains an important part of the strategy, we are applying a more selective approach. This slide highlights selected opportunities across herbicides, fungicides, insecticides, and biologicals.
The focus is not simply on adding more products. It is on prioritizing products that support margin, returns, and market relevance. Partnerships are an important part of this model. They allow us to access innovation and expand the portfolio while managing capital intensity and development risk. The pipeline is therefore being managed through the same strategic lens as the broader business. Focus on where we have a right to win and allocate capital to opportunities that can support stronger returns. That approach is consistent with the strategy refresh, which we'll come back to shortly. The next slide shows how the same discipline is being applied in hybrid seeds, where we see a clear growth opportunity. Hybrid seeds is a core growth platform for Nufarm, this slide highlights why we are prioritizing it.
We are accelerating adoption of proprietary hybrids by leveraging our intellectual property and our strong position in Southern Hemisphere markets. In canola, we are extending technology leadership in South America, including through the introduction of Imi tolerant hybrids. In sorghum, adoption is accelerating in Brazil with new varieties ramping faster than prior launches. In sunflower, new or higher performing genetics are supporting continued share gains. Across South America, sales have grown at a 17% three-year CAGR, which demonstrates the strength of the platform and the relevance of our genetics in those markets. Over time, our industry has evolved into an everything for everybody business model. We are choosing a different direction. What we are articulating is not only choosing what we will do, but also what we will not do.
We are sharpening the focus on where we can win and applying greater discipline to how we allocate capital and resources accordingly. First, we are prioritizing capital more effectively, reallocating toward markets where we have a track record of strong returns and a competitive advantage. This also means exiting assets and portfolios when they don't align with our strategy and returns discipline. Second, we are improving the quality of earnings and returns in crop protection. This is about narrowing our focus on crops and markets, as has been evident in this result, we are placing a greater emphasis on margin over volume. Our portfolio renewal will continue to come from partnerships that deliver innovation in a capital light model. Third, in hybrid seeds, we have a high-quality business with attractive growth opportunities.
In emerging platforms, we have a unique position with technologies that are sought after and supported by strategic partners such as bp. Here we are applying a more disciplined approach to investments to support growth and group returns. Overall, this refresh is intended to support stronger cash flow and improve margins and ROFE over time. In FY 2026, we remain focused on disciplined delivery, completing the previous AUD 50 million cost savings program we announced in FY 2025, and resetting our CapEx target to below AUD 200 million and continuing the path towards lower leverage. The strategy refresh provides the basis for additional efficiencies. In April, we announced further cost savings of AUD 50 million with run rate savings targeted by the end of FY 2027 and the full benefit expected in FY 2028.
For FY 2027, the current intention is to sustain CapEx at a similar level to FY 2026. Beyond that, our objective is to sustain positive free cash flow, continue improving ROFE, and operate the business within the leverage range of around 1.5 to two times. Collectively, these objectives reflect the financial discipline embedded in the strategy refresh and our focus on improving returns and cash generation across the cycle. I wanted to share a bit more detail on the new cost savings program. The focus in the FY 2026 program is centered around two areas. The first is rationalization of assets and portfolio, and the second is around operational efficiency and changes in our operating model.
The anticipated cost savings are spread across reductions in internal cost of goods and SGA, and I want to emphasize that we are not relying on external reductions in cost of goods to achieve the savings target. The FY 2026 program is expected to have cash implementation cost of AUD 15 million weighted towards FY 2027, with run rate savings targeted by the end of FY 2027 and the full benefit expected in FY 2028. In our crop protection business, we've taken several actions as a result of the strategy refresh. First, we are narrowing our portfolio focus around fewer crops and prioritizing capital towards markets where we can consistently earn returns above our cost of capital. Second, we are actively rationalizing assets to better align the footprint with that portfolio.
This includes the closure of the Wyke facility and closure and sale of the Kwinana site. Further footprint options are being assessed. We're also rationalizing the portfolio in North America to prioritize higher margin products. In doing that, we are deliberately foregoing some revenue in the short term and focusing on growing higher margin products as evident from our first half result. Third, we are driving ongoing operational efficiency, reducing fixed cost, capital intensity, and complexity. Collectively, these actions are intended to redeploy capital to higher returning activities and support more resilient margins and returns over time. In Seed Technologies, we are also taking action to improve capital discipline and returns while preserving long-term upside. We restructured the portfolio into two distinct operating models, reflecting very different routes to market, customer archetypes, and capital profiles. I
n hybrid seeds, the focus is on scaling our highest returning platform with a strong Southern Hemisphere bias. It is a traditional business to retail model where we influence grower decisions at the farm gate. Actions on the way include streamlining the European sunflower business through a licensing model and expanding in South America, both aimed at improving margins and returns while capitalizing on the rising global demand for plant-based oils. Emerging platforms is a business-to-business model relying on selective and unique strategic partners. Here, we are taking a deliberately more disciplined approach. In Carinata, growth is being supported through our expanded partnership with bp under a capital light model. In omega-3, we have reset to a lower cash spend and are undertaking a staged approach, with production and deregulation progressing in a measured way while keeping the long-term growth prospects intact.
Together, these actions are intended to sharpen returns while maintaining strategic optionality. Our priorities remain unchanged. We intend to update the market on progress at the full-year result in November. That brings us to our strategic priorities that continues to be cost and capital discipline, drive profitable growth in crop protection, and deliver on the reprioritized seeds strategy. To support those priorities, we have listed specific actions now underway. The first is the additional AUD 50 million cost savings program, which we have outlined. We have made good progress in resetting CapEx to a healthier level and reallocating it towards our chosen markets. Improving earnings quality and lifting free cash flow also remain key areas of focus. In crop protection specifically, we are shifting portfolio mix towards higher margin products.
In the U.S., we have developed a plan to improve returns and are in the early stages of execution. In Europe, first half progress on margins and returns was encouraging, and our focus is on sustaining that progress. In seeds, we are building out the new operating model around the two distinct businesses while continuing to expand our hybrid seed business across the southern hemisphere. We are aligning investments to a returns-based focus while maintaining strategic optionality in emerging platforms. With that, I am happy to take questions, and as I said earlier, Brendan Ryan, our CFO, will also join me in the Q&A session. Thank you. Understand now from getting instructions here, sorry, this is the first time we're doing this virtual conference, we are learning as we go. I have some questions here in the Q&A session.
The first one is from Lawrence Kenny: With analyst targets now clustering around the mid threes, what are the key operational milestones you think can help close the gap between today's share price and that fair value range? Thanks, Lawrence, for that question.
I think it comes back to the three priorities that we talked about earlier. It's really around capital discipline. It's around improving the profitability in crop protection and then also delivering on the reprioritized seeds strategy. If we add a little bit more color to those three, around capital allocation, we've taken a very deliberate approach in the strategy refresh of doing fewer things, basically, and then be really good at doing those specific things. Having a narrower crop focus, and that also means we can allocate less CapEx into growing those market positions we have within those existing crops. That helps us on how we allocate capital. It helps us on cash flow, and it also means that we have a higher likelihood of achieving the returns target we have for those investments we make.
In crop protection specifically, we saw really good progress in our European business this year, and we will want to see that momentum continue into FY 2027. In the U.S. crop protection specifically, when you look across North America, we have a very solid business in Canada. We have a solid business in turf and ornamental. Specifically in U.S. crop protection, we want to see some improvements there. As I said earlier, there is a current program in place to improve that performance, and we will want to see execution on that already this year and continuing into FY 2027. Lastly, the actions we've taken around seeds. To continue to grow on hybrid seeds, taking advantage of the growth in the markets in the southern hemisphere, while we also apply the same capital discipline into our emerging platforms.
All those things combined will help us improve our financial performance, and I hope we'll be able to see that reflected also in the share price going forward. We'll move to the next question from Eric Walker.
I can take that, Rico.
Okay, go ahead.
A question here from Eric Walker: Given the improving cash flow outlook and lower CapEx profile, when do you see scope to revisit capital management options like higher ordinary dividends or buybacks? Thanks, Eric, for the question. We have a capital management framework that considers these management options. Some of that criteria relates to the balance sheet health, the leverage of the company, and the growth opportunities that we have in front of us. The immediate focus, as we've outlined, is on earnings quality and improving the balance sheet health with a clear focus on cash flow generation and capital allocation to higher returns. That's the immediate focus, and once we continue to see the improvement in earnings and balance sheet health, then the options you've just outlined will be considered.
Thanks, Brendan. I think maybe, Brendan, you can also take the next question from Joseph Williams.
A question here from Joseph Williams: It looks like the first half EBITDA guidance and recent trading updates surprised the markets to the upside. What gives you the confidence that the double-digit EBITDA growth is sustainable into FY 2027? Thanks, Joseph, for the question. Again, the emphasis as we move into the next financial year, as outlined in the strategic refresh, in particular, is around the cost and capital discipline. Really having a focus on the areas that we can control, that's particularly around cost management. Secondly, around capital allocation and having that allocated to the segments of the business that we operate within that generates the higher returns.
We continue to operate overall on the balance sheet with tight disciplines on CapEx, then with the focus in particular around the tighter portfolio we have across the business, both from a crop protection perspective in terms of driving higher margin sales. The focus becomes on margin and value, as opposed to generally over just volume. Then on the seed technology front, we continue to grow on the hybrid seeds, which is our best returning business unit. In the emerging platforms around bioenergy and omega-3, we continue to improve over current performance.
Thanks, Brendan. There's a question here from Jonathan Berry, and I can take that. Jonathan Berry's asking: What are the top two drivers that could push earnings to a new peak in this ag cycle? I think it's a really good question, Jonathan, and I think the way you have to think about Nufarm is that we have these two core businesses, one being crop protection and the other one being hybrid seeds. We have the emerging platforms, which are very early in their commercial life cycle, so to speak. In the crop protection business, as I said earlier, we have really good momentum in Europe that we want to see continue. We have solid performance year-over-year in APAC.
In APAC specifically, we are expecting to get a launch of a new herbicide around 2028, 2029, which we've talked about in previous occasions publicly. That new herbicide will be a good addition to our portfolio in the APAC business. In North America, we have really solid businesses in Canada and in our turf and ornamental business in the U.S., but we do want to see improvements in our U.S. crop protection business, and that's why we put the performance improvement plan in place. A lot of the things you're going to see from us around asset and portfolio rationalization is linked to that U.S. crop protection business. All those things combined will help drive better earnings over the next few years.
In hybrid seeds, it comes back to really the Southern Hemisphere markets and those core crops that we operate in, canola, sunflower, and sorghum. Here we benefited from general market demand increases across the globe, and that's driving higher plantings of those crops in the Southern Hemisphere in Australia, but also particularly in Brazil and Argentina. Because we enjoy a leading position in those crops, we are basically growing with the market and then being able to take advantage of those market trends, and that will drive growth in that hybrid seeds platform as well. Lastly, as I said, we have those emerging platforms like Carinata and omega-3, which are very early in their commercial life cycle. Their contribution to the overall financial performance is rather limited in the short term. Obviously they will also grow over time and help the overall business performance.
We have a question from Leslie Cooper. The ChrysaLabs partnership and your Carinata program seem aligned with the broader decarbonization theme. How big could climate link solution be as a share of group earnings by, say, 2030? Thanks, Lisa. That's also a good question. We've not called out the specific impact for our emerging platform in the overall group performance yet. As I said, we are still quite early in the commercial status of those technology. Obviously, you could argue that when we sign a new agreement, which we did with bp just a few months ago, where bp agrees to an extension of the collaboration out to 2050, that will tell you that there's an incredible interest in companies like bp in securing the sources of those biofuels into their portfolio. We are very pleased with that collaboration.
The bp has been incredibly ambitious and forward-thinking in the way they address these markets, and we are very pleased that they chose us as a partner around Carinata. There's another question from, let's see.
I can take that, Rico, from Gus Muller.
Yeah.
On hybrid seeds to the omega-3, you've gone through a tough reset. What are the two or three concrete growth catalysts you see that could turn these platforms into meaningful profit contributors over the next couple of years? Thanks, Gus. On hybrid seeds, our position is very strong across the Southern Hemisphere, with our particular focus on our three oil seeds around canola, sorghum, and sunflower. Particularly in Australia, we have a strong history of an established position with growth profiles. In Latin America, the growth profile is very promising, and we've been in that market for a number of years and see continued growth available to us. In terms of omega-3, as you've mentioned, we've had a tough reset.
We have reset that business in terms of managing the cash flow to date, in terms of the current inventory levels that we have, and managing to a reduced cash cost basis, both on operating expenses and capital. In terms of a go forward, we have a clear plan in terms of re-commercializing that business. They rest on two key anchors. One is on the overall objective is to improve our cost competitiveness position. The levers on doing that is a reset in terms of the production zone, moving that from North America to South America, and we've commenced that on a cultivated trial basis in Argentina. Secondly, it's progressing on the deregulation, the China deregulation, and we expect that to be coming through in 2028. They are the two key levers in terms of being able to position the business for omega-3 for growth in the future.
Thanks, Brendan. I think the next one from Andrew Rice, you can also take that one.
A question from Andrew Rice. Free cash flow improved by almost AUD 200 million year-on-year. Should we think of this level of cash generation as the new base for the business? Andrew, on free cash flow, as you've probably picked up from the presentation this morning, generation of free cash flow is a key objective of our priorities today and also of the strategy refresh. Having the continued focus on cost management, in particular, as Rico spoke about the cost out that we've delivered in the current year and what's planned under the strategic refresh, the strict discipline on capital allocation, and that being pointed to the parts of the business that generate stronger returns.
Overall, the objective of reducing the capital intensity of the business, both from a footprint perspective and from a working capital perspective, will position us to be generating stronger cash flows than we have historically. As to what level they will be, it depends on those factors as well as the earnings quality.
Thanks, Brendan. I see we have more questions, but unfortunately, we're coming to the end of our allotted time. I want to thank you all for the interest in Nufarm and think of Nufarm in terms of key takeaways as a business that has very strong foundations in crop protection and hybrid seeds, and in hybrid seeds it's built around canola, sorghum, and sunflower. Those businesses have growth potential and the ability to deliver positive free cash flows and good returns. Then add that icing on the cake, so to speak, the opportunities we have in our emerging platforms are driven by biofuels around Carinata, but also omega-3 into the plant-based omega-3 market.
With that, I would say that Nufarm can offer you an interesting and alternative investment opportunity in agriculture, and I hope that you will take a look at our material, and if you have any further questions, please feel free to reach back to us. We have Grant Saligari, who's our investor relations on the call, and you will find his email address also here on your screen. Thank you again for dialing in, and I look forward to hear more from you in the near term. Thank you so much.