Nufarm shares lift on strong demand, inventory outlook
Make us a preferred source
Make us a preferred source on Google
More news: Shares in Nufarm are up 4.5% to $3.72 in early trading on the ASX after agricultural chemicals supplier said demand for its crop protection products has been strong so far in FY25 while its cost saving and inventory reduction initiatives remain on track.
The company identified $50 million of annualised cost savings, the full impact of which will be realised in FY26.
Citi analysts said the main crop protection business appeared to have made a solid stride in the first few months of FY25, driven by improved volumes and stable pricing.
Citi has a 'sell' rating on the stock with a target price of $3.75.
What they said: "However, pricing holds the key to recouping $90 million of gross margin impact (i.e. COGS stabilisation and price uplift). Given excess manufacturing capacity in China, we think the prospect of near-term change in pricing is unlikely," Citi said in a note.
"It is not all gloom and doom for pricing, as ordering patterns progressively normalise alongside rebates and with destocking very much complete. Stable-yet-subdued pricing could be the theme for NUF and the industry in FY25."
Nufarm says inventory reduction on track, demand strong
The news: Agricultural chemicals supplier Nufarm says demand for crop protection products has been strong so far in FY25 while its cost saving and inventory reduction initiatives remain on track.
The numbers: The company expects to achieve $100 million in revenue from its omega-3 canola in FY25 and said it is well advanced in plans for planting carinata in South America for the 2025 crop.
It is aiming for a 25-day year-on-year reduction in inventory by the end of FY25, and has identified $50 million of annualised cost savings, the full impact of which will be realised in FY26.
The context: Managing director Greg Hunt will tell shareholders at the company’s annual general meeting today that net working capital at the half year is likely to be marginally higher than the prior year, mainly due to additional working capital for the omega-3 platform and movements in currency.
Demand in its main crop protection products has been strong and, and while active ingredient prices have not moved materially, Nufarm is seeing the benefits of stability in cost of goods on crop protection margins.
The source: ASX announcement
