Nufarm Limited

Thank you for standing by and welcome to the New Farm Limited FY24 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Greg Hunt, CEO. Please go ahead.

Thank you, Harmony, and good morning, everyone. Welcome to the New Farm's financial year 24 results presentation. I'll just take a minute to draw your attention to the disclaimer on slide two and in particular the statement relating to forward-looking statements. Financial year 2024 was a tough one for the crop protection industry. Despite the challenges, New Farm continued to make good progress with our innovation and growth strategies. EBITDA was at the midpoint of the revised guidance that we gave on the 15th of August. We had an outstanding result on net working capital with a 30% reduction on the prior year. This had a similar impact on reducing debt. We finished the year with net debt of $635 million, which was 25% below the prior year. Net leverage was two times EBITDA, which is a very strong performance given our reduced earnings. Applying our capital management principles, there will be no final dividend for financial year 24. As we move into 2025, we'll continue to tightly manage costs and our balance sheet. We have clear targets to reduce costs and working capital. We will increase our focus on improving our return on funds employed. However, we will keep investing in our growth platforms. During the year, we faced competitive pricing as the industry moved volume and reduced inventory, particularly in North America. Demand remained healthy and we sold more product than we did in the year before. Tidal stocks are now lower, although reordering remains just in time. We continue to leverage strong results from our crop protection pipeline. New product introductions contributed to more than 15% of revenues We launched Oxpo Herbicide in Canada. It is the first to market in a series of herbicides powered by Duplassan, which is our Dicroprop range of products. Oxpo is a cereal herbicide that controls herbicide-resistant kosher, a weed that can lead to 20% yield losses in wheat, costing Canadian growers as much as $100 an acre each season. The launch of Oxpo was very well received by our channel partners and growers. and we plan to launch more Dupliserm products in 2025. Turning to application technology, New Farm partnered with New Zealand company Robotics Plus to design its quantum sprayer technology for the Prosper robot. We now distribute this complete solution across Australia and New Zealand. We also made a small investment in Norwegian-based Kilter, which is developing spray equipment uses advanced technology to precisely target weeds for herbicide application. And in another initiative, New Farm is partnering with UK-based research company, MOA, to develop herbicides with completely new modes of action. We are strengthening our positions across sunflower, sorghum and canola seeds. We grew our hybrid canola share in Australia and Brazil. and we see a real opportunity to leverage our leading canola traits to drive further expansion in South America. We made significant progress in Omega-3. We reached our target of 50 million of Omega-3 sales. We also expanded the grower base and the area planted, and our latest hybrid varieties performed very well. In July, we entered into an exclusive license for Yield 10's Omega 3 Camelina technology. In biofuels, we expanded Carinata planting. While mandates for biofuels are developing, we are focusing on production from the best advantage markets. We are working to optimise our cost of goods and establish market value. During 2024, Carinata was included in the Annex 9A of the European Union's Renewable Energy Directive making Carinata one of the few scalable agricultural technologies to meet the legislative criteria for SAP mandates. Turning to performance of our segments in more detail, in North America, underlying EBITDA was 49% below the prior year. Price competition negatively impacted our margins. Despite this, there was strong demand for new farm products. We matched prior year revenue. with strong volume growth. Turpent ornamentals in Canada delivered results in line with the prior year. As I mentioned before, we had a successful launch of the first of our Duplassan powered products in Canada. In Europe, underlying EBITDA was 25% below the prior year. New farm volumes and margins held well in the European domestic market. There was pricing pressure on foundational products. However, we had strong performance in the higher margin TNVV, so trees, nuts, mines, vegetable crops. We sell about 65% of our production from our white facility to new farm and third-party customers outside of Europe. Sales volumes were down, driven by lower demand, particularly in the China green roofs market and in North America to both New Farm and third-party customers. We are working to reduce costs and lift returns in our European segment. Our APAC segment reported EBITDA of $88 billion, which was in line with the prior year. Demand for New Farm products was strong. Australia was negatively impacted by low 2,4-D prices. In New Zealand, poor farmer economics impacted sales and volumes. We had an exceptional result in Asia with growth in EBITDA on the prior year. Asia is one of the regions with the highest growth and highest return on funds employed. We expanded 2,4-D capacity at Labaton. This reduced our production cost and strengthened our global supply capability. It puts us in a strong position to respond to the introduction of duties on 2,4-D in the United States. In seed technologies, EBITDA was 15% below the prior year and this was largely because licensing revenue was lower than the prior year and we have higher costs as we scale our Omega-3 and biofuels platforms. We had strong canola performance in Australia with our new TruFlex hybrids delivering higher revenue and margin. We expanded our position in South America leveraging our southern hemisphere adapted genetics from Australia. We acquired Laboo, a distribution business in Uruguay, to provide more support for our canola and carinata expansion. We also licensed out our sunflower hybrids in the Europe and Eastern European markets. It was an important year for Omega 3. We reached our target of $50 million revenue. We expanded our growing lace. and the planted area, our 2024 crop showed a further improvement in grain yields with an improved oil profile. We entered a license for Yield 10's Omega 3 Camelina, and this transaction gives us an opportunity to expand our Omega 3 portfolio with additional oil profiles and the potential to produce Omega 3 in winter Camelina crop that is grown as a cover crop. While still in the development phase, the technology and pipeline are expected to be highly synergistic to our existing Omega 3 canola platform. Our Carinata expansion plans in Argentina were tempered by unseasonally wet conditions and the late soybean harvest, and we were unable to plant all of the contracted hectares. We expanded in Uruguay and launched in Brazil with a very successful harvest and momentum for an increased planting in 2025. There was continued strong demand from growers in Argentina. We advanced our breeding pipeline with improved yields, oil content, shorter maturities and testing of herbicide tolerant traits. Although we expect industry conditions to improve, we are not sitting around waiting for that to happen. We have clear priorities to improve our business performance independently of movements in the cycle. We are targeting $50 million in annualised savings in overhead costs by the end of financial year 2025. These cost reductions are aimed at non-revenue generating functions. We want to operate in a leaner and more efficient way. We are targeting a 25-day year-on-year reduction in inventory also by the end of financial year 2025. We are refining our planning processes and behaviours so that we can operate with reduced stock levels that still meet customer demand. These and other initiatives aim to improve our profit and capital efficiency. We need a better return on funds employed. We have clear priorities for growth. We plan to continue to scale omega-3 and biofuels. We will make investment in areas where we believe that we can win. including strengthening our Phenoxy platform with the investment at WIKE, focusing our portfolio spend in areas with more immediate impact and leveraging our leading positions for more growth in canola, sorghum and sunflower seeds. We hand over to Paul and take you through the financial summary.

Thanks Greg and good morning everyone. Revenue was 4% below prior year, underlying EBITDA 29% below prior year and underlying EBIT 57% below prior year. Statutory net profit was a $6 billion loss. Material items included idle plant costs associated with improvements undertaken at Leviton and Wyke as well as restructuring costs. These costs were partly offset by profit on sale of surplus land utilisation of a deferred tax asset. It reported underlying basic earnings per share of negative 6.3 cents. At the end of financial year 24, net debt was $635 million, which was 25% below the prior year. Net leverage was two times underlying EBITDA. The reduction in net debt was principally driven by a reduction in net working capital, which we'll speak to, in more detail on the following page. Return on funds employed was 4%, which was 490 basis points below the prior year. The fall in return on funds employed was due mainly to a reduction in underlying EBIT compared with the prior year. Remedy declined 4% over the year. The reduction was mainly due to lower selling prices and a negative shift in mix in crop protection. Average selling price drifted modestly lower in the second half. We achieved strong growth in volume, which partly offset the negative impact of price and mix. Revenue increased in our seeds business, driven by the strong performance of our canola hybrids. Revenue from bioenergy was lower due to a lower level of licensing revenue, and as discussed by Greg, we grew omega-3 revenue. We reduced net working capital by 30% on the prior year. The reduction was driven by lower inventory, normalisation of payables and strong performance in the management of our receivables. Net working capital was $710 million lower than the first half, reflecting seasonal movement in working capital and reduction in inventory. As we have discussed on many occasions where a seasonal business and half on half fluctuations in work and capital are a normal part of our business. And this half sum wind is consistent with, in fact, pleasingly better than what was reported at the half on results in May. Operating cash flow was $472 million for financial year 24. Strong cash conversion was due to the net working capital reduction. I note that cash conversion has averaged 73% over the prior four years and we remain focused on this objective. In terms of working capital, we finished the period with a 300 million or 20% year-on-year reduction in inventory. Through advances in areas such as advanced collaborative forecasting, supply planning, seasonal business planning and supply chain agility, we expect to be able to further sustainably reduce inventory without negatively impacting customer service. We continue to see payables normalised as the business moves to a more normal cadence of replenishment. Trade and other receivables were in line with the prior year and reflected discipline in commercial terms in a competitive environment and strong collections performance. In terms of capital expenditure, It was $254 million for the period. This included targeted investments to address HSC and plant reliability at Wyke and growth at Cargo Heights and Laverton in the 24D area. These investments are aimed at reducing plant downtime and strategically expanding capacity and have strong near-term payoffs. We maintain investment to grow our seeds platforms, which remains a high priority. We also invested a number of small strategic investments of around $15 million, which Greg covered earlier. In FY25, we expect capital expenditure to be around $230 million. Seeds and portfolio CapEx are expected to be in line with the prior year. The majority of our seeds CapEx continues to go into our MEGA3 and Carinata growth platforms. Supply chain capex excluding Trans-End is expected to be lower than the prior year. We continue to assess investment into the Trans-End project which is a plan to expand Phenoxy manufacturing capacity at Wyke and maintain our global leadership position in Phenoxy herbicides. Trans-End is subject to a final investment decision which we expect to make during the first half of 2025. In terms of net debt, for the purpose of this presentation, we have provided you with a slightly different lens on our net debt, which we hope better assists you in understanding how we manage our debt position. Our asset-based lending facility is shown on the left of the graph. The ABL is secured against receivables and inventory and flexes up and down to accommodate movements in these balances. Reflecting our lower net worth and capital position, utilisation of the ABL was lower at the end of financial year 25 than financial year 23. We present remaining debt net of cash balances as core net debt. Largely this comprises our US senior unsecured notes, standby liquidity facility and local bank facilities. The US notes and syndicated loan facility that no financial maintenance covenants. Our targeted net leverage range of 1.5 to 2 times EBITDA reflects our desire to maintain conservative leverage through the cycle. At various points in the cycle, it is conceivable that we'll either be below the low end of the range or above the high end of the range. Largely, these deviations reflect cyclical variation in net working capital and earnings. Again, I emphasise that this leverage target is not related to the existence of debt covenants, but is set by our capital management principles. At the end of financial year 24, total net debt was $635 million, a 25% reduction on the prior year. The reduction in net debt was primarily driven by a reduction in net working capital. We had $355 million of undrawn facilities at Burlandstown. Net leverage was at two times over done, which is at the upper end of our target range. We're extremely proud of this result in the face of cyclically lower earnings. And lastly, just to assist you with your modelling, for financial year 25, we expect depreciation amortisation expense of around $210 million. Net interest expense, including the cost of FX hedging, expected to be around $90 million. and we expect an underlying effective tax rate of 26%. Capital expenditure is expected to be around $230 million. Now I'll hand back to Greg.