Farmers eye yield gains as fertiliser, fuel costs surge
The country’s main supplier says farmers are choosing not to lay down fertilizer for a year due to rising costs but are still willing to spend on seeds and plant protection products.
Nufarm managing director Rico Christensen said farmers around the world were looking to offset rising fuel and fertilizer prices as a result of conflicts in the Middle East.
“Most farmers have options to reduce some fertilizer applications,” he said during an earnings briefing Wednesday.
Farmers who have done their work in previous years can skip or reduce fertilizer application for a year without significantly affecting yields.
“They don’t seem to be compromising on the quality of the yield they get from the farms,” Mr Christensen added.
Farmers are willing to pay for the products Nufarm sells because they focus on high yields.
“We’re not seeing a radical change in farmers’ spending on crop protection and seeds,” Mr Christensen said.
The Melbourne-based global seed and plant protection business reported net profit of $38 million in the first half, up 28 per cent on the previous year.
The stock rose to a one-year high of $2.93 and fell slightly as the stock market headed to the close, rising 13.3 percent to $2.90.
Nufarm reduced its net debt by $135 million to $1.23 billion in the six months to March 31 and said it would cut spending in certain areas to become a leaner and more focused organisation.
Capital expenditure is expected to be less than $200 million in 2025/26; This figure is down from $246 million the previous year.
Mr Christensen said the industry had evolved into an “everything for everyone” business model, but Nufarm had chosen to go in a different direction.
“We are focusing on where we can win and applying more discipline in how we allocate capital and resources accordingly,” he said.
Unlike some businesses in other sectors, Nufarm did not see much of an impact from the Middle East war.
“We had some difficulty sourcing packaging materials from a few markets, but we overcame any short-term impacts we saw at the time,” Mr. Christensen said.
Nufarm reaffirmed its full-year guidance, saying it expects strong earnings growth and leverage to fall to double net debt from 2.7 a year ago.
RBC Capital Markets analyst Owen Birrell said the result was broadly in line with expectations, with better-than-expected seed technology earnings and worse-than-expected crop protection earnings.
As expected, Nufarm did not declare a dividend.
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