Nufarm Limited

Thank you Ashley. Good morning everyone. Welcome to New Farm's 2024 interim results presentation and thank you for joining us today. Before we get into the presentation I'll just pause for a moment and draw your attention to the disclaimer on slide two and in particular the statement relating to forward-looking statements. Experiencing challenging conditions during the half, we continue to be pleased with the progress that we're making on our strategies, which aim to deliver long-term value for our shareholders. In the context of the industry conditions that we faced, New Farm delivered a solid result for the first half of financial year 24. For the period, we reported underlying EBITDA of $217 million and statutory NPAT of $49 million. we declared an interim dividend of $0.04 per share. We remain focused on our strategy, achieving important milestones in crop protection and in our seeds, Omega-3 and Carinata platforms. Now to the piece that I'm sure you're all looking for. For the financial year 24, we expect EBITDA of between $350 and $390 million. The midpoint implies a reduction of 16% from financial year 23 and 17% from record EBITDA reported in financial year 22. As we continue to move to more normal supply-demand dynamics, we expect a stronger second half than in financial year 23. The midpoint implies growth of 25% year-on-year in EBITDA in second half 24. Whilst we're never satisfied with the decline in earnings, that would be a very solid result in the context of the conditions that have been faced by the industry. Our balance sheet position remains strong. Despite an increase in average working capital during the period, we remain very focused and committed to driving efficient use of capital through our business and we expect average net working capital to return to within our target range which Paul will speak to in detail later in this presentation. During the first half, we made significant progress reducing inventory. As of the 31st of March, 2024, inventory was 20% lower than the 31st of March, 2023. In crop protection, we reduced inventory by 435 million year on year. We appreciate that you will have questions about the 3.6 times leverage ratio for the half. We want to remind you that our debt financing provides significant flexibility to meet movements in working capital and we have minimal financial covenants associated with our facilities and all growth initiatives continue to be supported. Assuming a normal seasonal unwind of working capital and phasing of profit we expect to return to the upper end of our target range of one and a half to two times underlying EBITDA by the end of financial year 24. We are on track to meet our 26 financial aspirations. We continue to see a healthy backdrop for the crop protection industry over the medium and longer term. A recovery from secretly low prices is likely once channel stock issues, especially in Brazil, and parts of Europe are dealt with. That should in turn create a better balance between supply and demand dynamics and a reversion to prices to more historical norms. We continue to expand our omega-3 and Carinata plantings with current planting intentions supporting strong growth in revenue in 2025. We are reaffirming our 24 omega-3 revenue guidance of 50 to 70 million and our ambition to more than double revenue from Omega 3 in financial year 25. We are currently expanding and diversifying plantings of Carinata as a plant. Turning to our segment results, during the first half, the crop protection industry continued to feel the impacts of growers and distributors reducing inventory to more normal levels. Those actions have negatively impacted revenues and profit in this result. The reduction in grower and distributor inventory also had an impact on manufacturer pricing. There are several charts in Appendix 11 of this presentation that illustrate the size of the industry-wide price reductions that have occurred. These price reductions have negatively impacted our revenue and margins. We believe that these price levels are temporary and whilst we're not able to predict the exact timing, we expect that prices will return to historical levels once the residual impacts of distributor and grower destocking have washed through the supply chain. In recent data points, we have seen some tentative signs of prices increasing for some key herbicides. Whilst our revenues and margins were impacted by the conditions that I've mentioned, we continue to manage our business for the long term, focusing on driving sustainable growth improving the customer experience and delivering operational excellence. We grew crop protection volumes in the first half. I highlight this growth because it demonstrates the strength of our market positions and the prospect of revenue and profit rebounding with a return to more normal supply and demand conditions. We achieved several important strategic milestones in our seeds business. We continue to expand base seeds in South America and see significant opportunity for further expansion in that region. We delivered omega-3 oil to customers in Chile, the US and Canada and expanded our grower base for omega-3 canola to support further growth in financial year 25. We continue to progress discussions with potential partners for distribution and marketing within certain neutral terra segments in the USA. We reaffirm our guidance for FY24 omega-3 revenue of 50 to 70 million and are on track to more than double revenue from the 24 financial year base in financial year 25. We continue to expand our geographical footprint for Carinata planting. In the first half, we expanded planting in Argentina and the USA and we held launch events in France and Spain. In an important regulatory development, cover crops were included in Annex 9A of the European Union's Renewable Energy Directive. Inclusion ensures that Carinata has a strong position as a feedstock for sustainable aviation fuel. This policy takes effect in June. Inclusion of cover crops in Annex 9 is a very significant signal toward the future value and demand for Carinata within EU sustainable aviation fuel markets. During the period, we achieved further milestones for Energy Cane with the launch of next generation hybrids with increased biomass and sugar per hectare for resulting ethanol conversion. We have successfully expanded our customer base for Energy Cane in Brazil, and whilst it will take time for revenue to build, This is another endorsement of our bioenergy platform. Turning to regional performances, in our North American segment, we recorded revenue of $637 million and underlying EBITDA of $48 million. We achieved strong volume growth in North America. Sales and margin were mainly impacted by lower prices for non-selective herbicides. We grew revenue in Canada with stronger volumes in several key brands driving the volume increase. Our turf and ornamental business performed solidly with revenue marginally down year on year and inventory across the region reduced year on year. In APAC, we reported revenues of 459 million and underlying EBITDA of 50 million. Favorable signal conditions on the east coast of Australia and Indonesia resulted in strong demand and a normalisation of inventory levels. Declining global prices for key products resulted in a year-on-year reduction in net sales and margins, with historically low 2,4-D prices the main contributor to reduced earnings. Our 2,4-D plant in Laverton is being bought back online following the works to upgrade and expand manufacturing capacity. Final works as part of this upgrade are expected to be undertaken in the second half of the year. In our European segment, we reported revenues of $406 million and EBITDA of $71 million. Sales and margins were negatively impacted by lower volume and price due to unfavorable weather and distributed destocking. Wipe was negatively impacted by lower volumes of sales to industrial customers which were affected by destocking in the agricultural segment and a prolonged downturn in the China property market. Whilst we made progress in reliability and asset integrity initiatives at WIKE, these efforts were more than offset by lower volumes. Across all regions, we continue to execute on strategies which aim to generate long-term growth in profit and improved return on funds employed. We continue to focus on more efficiently managing working capital, including more effective management of inventory, supplier and customer terms, improving commercial disciplines, and focused use of capital. Our investments in reliability to further improve HSC performance and production capacity at our white manufacturing facility and expanding capacity and reducing the cost of 2,4-D manufacturing at Laverton are expected to lead to improved growth and profitability. Turning to seed technologies, we achieved a strong result in seed technologies with revenue of $256 million and EBITDA of $76 million. Base seeds were driven primarily by year-on-year growth in Australia and South America. North America's sunflower and Brazil's sorghum revenue was softer due to lower planting. and revenue from seed treatment fell year on year due to customer destocking. During the half, we increased our sales of Omega-3 products in the Americas, including Chile, the USA, and Canada. Following the approval of AquaTerra for use in Norway, we moved forward with commercial negotiations for entry into that market. We also contributed to progress discussions with potential partners or distribution and marketing within certain nutraceutical segments in the US for expansion of our Nutraterra products. Grower acceptance of Omega-3 canola continues to build. During the period, we expanded commercial contracts with growers to support expected sales growth in 2025. We concluded the 2023 crop year with multiple audited and verified proof of sustainability certifications for Carinata, which can be applied to sustainable aviation fuel, renewable diesel and sustainable maritime fuel. The 2023 Argentina crop harvest was successfully shipped to Europe and is in the process of crushing sales with our partners. New Farm and BP held a large launch event showcasing the 2024 growing crop in Florida in March of this year. with major airlines, mining companies, transport companies, policy makers and supply chain partners in attendance. Supply expansion activities for the 2024 Carinata crop are in progress with the expansion of confirmed farm contracts already in hand in Argentina and Uruguay. Our first year of farm contracting and geographical expansion from the Brazil market is also well advanced firm contracts with farmers in hand. Initial launch activities have been conducted in Spain and France for small commercial scale planting in 2024. Meanwhile, governments are increasingly creating mandates and incentives to increase SAF production. The EU moves to a 2% SAF mandate from 2025. The mandate rises to 6% from 2030 and hits 70% in 2050. Singapore has also recently announced the SAP mandate, which will be introduced at 1% of aviation fuel volumes from 2026 and increasing to 3% to 5% by 2030. Other countries, including Japan and the United Kingdom, have also announced proposals for SAP mandates. In concluding on seed technologies, I note that the first half 24 result includes licensing revenue which was not booked in the first half of 23. The inclusion of licensing revenue in the first half is due to the phasing and is not expected to be repeated in the second half. I'll now hand you over to Paul.

Thanks, Greg, and good morning, everyone. In the first half of fiscal 24, we reported revenue of $1.8 billion, underlying EBITDA of $217 billion and underlying end payment of $51 billion. Underlying impact was broadly in line with statutory impact of $49 million. We declared an interim dividend of $0.04 per share. In comparison with the prior year, revenue declined 10%, underlying EBITDA declined 31%, underlying EBIT declined 58%. We'll talk about network capital leverage in detail on subsequent slides. Importantly, I note that comparison with the prior period is impacted by the expected change in EBITDA phasing between the first half and second half of financial year 24 as compared with financial year 23. As you may recall, in FY23, EBITDA in the first half was 72% of the full year EBITDA. First half is expected to comprise approximately 55 to 60% of the full year 24 EBITDA as indicated by our guidance range. The anticipated change in phasing has been brought about as the channel has reduced inventory and moved to replenish stock in season. This has resulted in downward pressure on prices and ultimately margins. For protection revenue bridge, This slide shows the revenue bridge for our crop protection segment compared to the prior corresponding period. Not surprisingly, price impacted revenue negatively during the period. Channel B stocking led market-wide reductions in active ingredient prices. Price reductions were passed on by formulators and distributors, including ourselves, resulting in a negative impact to revenue during the period. Growth in volume contributed positively to the revenue bridge during the half. We had particularly strong growth in volume in North America. We believe that volume growth is important as we continue to support our customers and positions us well for an eventual rebound in prices. Changes on foreign currency rates had a negligible impact on revenue. Operating cash flow. We experienced an operating cash outflow of $207 million for the half. The outflow is considerably below the $5.59 million outflow experienced in the first half of 2023 and reflects a more normal seasonal level of networking capital. We achieved a small reduction in networking capital on a year-on-year basis. During the period, we maintained a concerted focus on reducing inventory. The impact of these efforts were partly offset by higher receivables and lower payable balances at period end which we will discuss on the next slide. Consistent with prior years, significant cash inflows expected from the net working capital movement in the second half. By way of illustration, the three-year average first half to second half receivables movement, or cash inflow, has been $533 million. Net working capital. At the end of the period, net working capital was 3% below the prior year. We made considerable progress in reducing inventory year on year, whereas higher period in receivables reflected a stronger ending to the second quarter than the prior year. We are particularly pleased with our inventory result. We finished the period with inventory 20% below the prior corresponding period. Trade receivables were 133 million above corresponding period, reflecting a strong finish to the first half. Payables were $189 million below the prior corresponding period, reflecting reduced levels of ordering. Average net worth in the sales was 47%. This was above prior corresponding period and largely reflected the higher than normal inventory levels maintained throughout this period of time, due to the change in customer ordering patterns and the seasonal build that normally occurs in the first half. Going forward, through further inventory reduction and normalization of payables, we expect to return to our average network and capital sales target of between 35 to 40% financial year 25. Inventory bridge. This shows our inventory bridge Inventory in our crop protection business fell $435 million year-on-year and was driven by lower volume of stock at hand. Inventory in seeds increased to support the growth of that business and overall inventory fell 20% year-over-year. Capital expenditure. CapEx was $110 million in the first half. Spending on property, plant and equipment was in line with prior corresponding period and driven mainly by our investments in further improvements in health, safety and environment, asset integrity and plant efficiency. As mentioned at the full year 23 results, we plan to spend around $100 million per annum over the next three years across the business on a range of initiatives, in particular, like in the UK. The intangible or product development spend was $54 million and includes an element of growth investment to support our revenue aspirations through the development of new products for crop protection and new hybrids and new market registrations for seeds. Growth investment include a preliminary spend of $8 million on a major investment in wine, which is expected to be $140 million over the next three years. The majority of this spend will be in financial year 25 and 26. As previously communicated, this is a very important significant upgrade in our phenoxy capacity operation. As indicated in the financial year 23 four-year results, we expect total capex spend to be around $240 million, consistent with FY23. And also note that we expect to finalise the sale of non-core property assets, which is expected to generate net sales proceeds of $40 million in the second half. And in line with our capital management framework, we continue to assess growth opportunities with regard to referred turn-on funds employed, where the target return is greater than New Farm's weighted average cost of capital. Net debt. We finished the period with net debt of $1.2 billion. Net leverage was 3.6 times underlying LTM EBITDA. Can I assure you that this target ratio does not cause any issues for the company's debt facilities? Leverage above the target range was due to the combined impacts of seasonal working capital, lower earnings in the first half, and the second half 23 representing a lower proportion of full-year earnings than normally expected. As an illustration of the phasing impact, adjusting the second half 23 EBITDA to reflect a more normal 55-45 cent 1H28 split for FY23, adjusted net leverage for the 12 months ending 31 March 24 would have been 2.9 times underlying EBITDA. We expect the leverage to be within the upper end of our 1.5 to 2 times target by the end of FY24 assuming a normal unwind of working capital in the second half and that we achieve our FY24 EBITDA outlook. Newfarm's debt facilities and available liquidity continue to provide a flexible and durable covenant-like capital structure that accommodates volatility in our network and capital cycle. We have no near to medium term refinance requirements and the group retains access to substantial amounts of cash and committed bank liquidity. FY24 leverage expectations. I'd like to spend a few minutes discussing the expected path back to one and a half to two times leverage in FY24. The diagram on this page is conceptual and shows the main components in this path. As mentioned previously, the expected reduction in net debt through the second half is anticipated to be mainly driven by seasonal reduction in receivables. For reference purposes, I've indicated that the average first half to second half reduction in receivables over the past three years has been $533 million. In addition, we expect to achieve a better balance between payables and inventory as our stock replenishment activities get us back into a more normal cadence. EBITDA is expected to broadly cover other cash items such as capex, interest, cash taxes, dividends, etc. The bottom half of the chart shows the expected change in LTM underlying EBITDA based on our guidance. If you do a little maths around those items, you should be able to see that there is a credible path back to within, noting more towards the upper end of the one and a half to two times leverage at the end of FY24. Importantly, the anticipated reduction in receivables is based on a normal, unwinded working capital instead, specifically the seasonal phasing of sales and collections. If sales, for example, more heavily weighted to the end of the second half, then the return to our leverage target would be delayed. Under that circumstance, we would still anticipate getting back to within the range just a few months later than the close of FY24. Further, moving back to within the target leverage range also assumes that we achieve our EBITDA outlook for FY24. I hope this page helps you to form a view about our anticipated path back to our leveraged target range. And finally, on other expected financial items. On this slide, I will outline our expectations for a number of these items to assist you with your forecast. Corporate costs for full year 24 are expected to be marginally below the prior corresponding Depreciation expense in the second half is expected to be broadly in line with the first half. Second half net interest expense is expected to be marginally above first half interest expense. The tax rate is expected to be 23% for the full year 24. I'll now hand back to Greg.

Thank you, Paul. I want to take some time to discuss the pricing environment and our expectation for price recovery beyond the current phase of destocking. The chart on the left-hand side of this page shows that current prices for crop protection products are well below historical average due to the temporary impacts of distributed destocking, which has led manufacturers to sell product at lower prices. The data is taken from independent data sources, AgBioInvestor and Bainfolk. We believe that the issues that have impacted prices will be largely resolved through the course of calendar year 2024. Excess inventory at the distributor and global level, especially in Brazil and Europe, is likely to be drawn down during the 2024 calendar year. The drawdown of distributor and grower inventory is expected to normalize and create a better demand and supply balance. This should, in turn, lead to manufacturer inventories and utilization rates to return to normal. We believe this creates the environment for prices to return to historical averages in the short to medium term. Whilst we're unable to pinpoint the timing of price recovery, in general, we expect price to be a tailwind for revenue and profitability beyond financial year 24. On this and the next several slides, we want to remind you of the journey that we're on with our business and why we are confident in hitting our revenue aspirations. As a reminder, we are targeting revenues of $3.8 to $3.9 billion by financial year 26 in our crop protection business. Achieving that target is based on management forecasts and assumes a return to normal long-term average prices. Market prices are the main factor that are outside of our control. Many of the other inputs to achieving that aspiration are within our control. In the period 2016 to 2021, we reset the cost base for our crop protection business. During that period, we closed a number of factories and implemented a performance improvement program in Europe. We made the century and FMC portfolio acquisitions to build the necessary scale to be successful in our European business. We opened our state-of-the-art formulation facility in Greenville, Mississippi. We also sold our crop protection business in South America, including because we did not think that we had the right model to be successful in that market at the time. Moving on through the timeline, we have been completing the investment programs in our plants with Wyke, the last of our major manufacturing facilities requiring material investment in the near term. At our 2022 Strategy Day, we highlighted 22 major portfolio projects that we believed would contribute to achieving or would help to contribute to achieving our FY26 revenue aspirations. I can now say that as of today, the majority of those projects have either been launched or are in launch phase. As we move into 2025 and 2026, we are anticipating a recovery in market prices. We are aiming to continue to strengthen our position in phenoxy herbicides and to continue to deliver on our new product introductions. As a reminder, we compete in a $70 billion market. That market is primarily off patent, which means that there are few barriers to us competing with innovative formulations that are affordable, and effective for growers. Growing population incomes and demand for food creates a strong backdrop for demand. Moving on to the next slide, on this page we show progress with the development of our omega-3 platform. By now you will all be familiar with the basis of our omega-3 strategy. Our omega-3 canola meets a growing need for a sustainable alternative to fish oil to meet growing demand for omega-3 in aquaculture, food manufacturing and dietary supplements. In a short period of time, we've come a long way and are now rapidly scaling our omega-3 business. Over recent years, we have continued to scale our grower relationships and commercial sales in Chile, the USA and Canada. In 2023, we gained approval to sell AquaTerra in Norway. We expect to make commercial sales in that market in 2025. The Norwegian market is a large and important market for AquaTerra. We've also spoken about deregulation being an important driver of our cost of production. I'm pleased to say that we are making steady progress. Earlier in 2024, we received permits for phase two in country verification in China. That is a necessary step towards meeting the repertory approval requirements in that country. Previously, we've discussed that partnerships could be an important mode for increasing the presence of Nutraterra in the human supplements and food ingredients markets. During the period, we appointed Conoils as our exclusive partner for producing and distributing Nutraterra DHA canola oil in powder formats. Conoils is a leading international oil powder manufacturer, distributor and wholesale supplier of bulk oil ingredients. In 2025 and 2026, we expect to continue to scale amethyst reproduction. Whilst our main focus will continue to be aqua feed, we also expect to see opportunities for expansion, probably through partnerships in human nutrition and other segments of the markets. We see biofuels as a long-term growth platform for new farming extending well beyond our 26 aspirations. We launched Carinata in Argentina in 2018 and made the first shipment of Carinata for commercial scale-crushing 2022. We established a 10-year partnership with BP to support the scaling of Carinata production and sales. In 2023, we expanded production to the USA and launched our first hybrid system. In 2024, we are expanding our production further in the southern USA and Argentina, and we've launched plannings in Brazil. We also held launch events in France and Spain. From 2025, SAF markets enter an important phase with mandates taking effect in a number of important large aviation markets. The EU SAF mandate commences in 2025. initially with a 2% blending requirement which increases to 6% in 2030 and then it increases rapidly to reach 70% in 2050. Singapore's SAF mandate commences in 2026 and Japan and the UK have also announced policies for at least 10% mandated SAF blending by 2030. We've also highlighted the inclusion of cover crops in NX9 of the EU's Renewable Energy Whilst energy cane is at an earlier stage of development, we achieved an important milestone during the period, expanding the number of customers to more than 40 mils. We see a strong future for our biofuels platform. Turning now to Outlook. Despite near-term challenges, we believe that the industry has positive long-term fundamentals. Growing population and incomes create increasing global food needs, driving growth for seed and crop protection solutions. Omega-3, Carinata and Energy Cane create additional and diversified growth for new farms. For fiscal 2024, we are guiding to underlying EBITDA of between $350 and $390 million. The midpoint of guidance implies a reduction of 16% from financial year 23 and 17% from the record underlying EBITDA that we reported in financial year 22. We expect comparatively strong growth in the second half of 24, with the midpoint of guidance implying growth of 25% year-on-year in EBITDA in the second half of 24. As I mentioned earlier, we're never satisfied with the decline in earnings. However, a 25% growth in half two over last year would be a very solid outcome in the context of the conditions that have been faced by the industry. We are reaffirming our omega-3 guidance for revenue of 50 to 70 million in fiscal 24 and plantings of omega-3 canola in 2024 support our ambition to more than double revenues from omega-3 products in fiscal 25. We're on track to meet aspirations for revenue from crop protection of 3.8 to 3.9 million and revenues from seed technologies of 600 to 700 million in financial year 26. This is based on management forecasts and assumes a return to long-term average pricing in crop protection. For the reasons discussed today, we expect pricing in the crop protection industry to normalize. Although the timing cannot be precisely predicted, we have some very positive signs of prices stabilizing in recent data. As previously discussed, we have a strong correct pipeline. We expect strong growth in Omega-3 and in our base seeds business. Our biofuels platform, including Carinata and Energy Cane, continue to expand and provides a strong platform for future earnings contribution. So I'll stop there now and hand back to Ashley for Q&A.