Nufarm Earnings: Seeds Potential Overlooked as Market Focuses on Temporary Industry Challenges

Agricultural innovator no-moat Nufarm forewarned of challenging fiscal 2024 first-half conditions during its fiscal 2023 earnings release in November 2023. It confirmed the industry was still dealing with an overhang of inventory and higher cost of goods, with margins pressured, in February 2024. But we underestimated crop protection headwinds—group fiscal first-half underlying net profit after tax fell 64% on the previous corresponding period to just AUD 51 million. We expected a 23% fall to AUD 110 million. Price pressures hurt revenue and margin, with industrywide inventory destocking featuring. Seed technologies was the one bright spot.