Nufarm Limited

Thank you for standing by and welcome to the New Farm Limited 1H26 results. 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Repo Christensen, CEO. Please go ahead.

Thank you, Ashley. Good morning, and thank you for joining us today for Nufarm's first half FY26 results. With me today, I have our CFO, Brendan Ryan, our Group Executive for Portfolio Solutions, Beth Lossback, and our General Manager for the Hypersheets Business, Rachel Paloma. Over the past year, we have been very deliberate in sharpening our focus to improve earnings quality, strengthen the balance sheet, and increase capital discipline. Today's presentation reflects good progress on that journey. I'll walk through the first half performance. Brendan will then discuss the financials in more detail. And lastly, I will talk about our strategy refresh and close with our outlook commentary. Before we begin, I encourage everyone to read the important notices on the next page regarding forward-looking statements and non-IFRS measures. As always, Our comments today are subject to market conditions and the risks outlined in this presentation. I am pleased to report that we have delivered a strong result with 18% growth in EBITDA and 35% growth in NPAT over a prior transforming period. We also delivered a significant improvement in free cash flow of $193 million, reducing our leverage to 3.6 times net debt to underlying EBITDA which is not only better than last year, but also on par with the first half of FY24. Revenue was lower year on year, reflecting a deliberate focus on improving mixed and prioritizing margin over volume. Growth profits increased 7% and reached a margin of 33.1%, which is the highest growth profit percentage Blue Farm has reported in the last 20 years. Later in the presentation, we will provide more detail on the strategic choices we have made to change our margin profile and our focus going forward. Recently, this overall performance gives us the confidence to reaffirm our outlook for the full year in regards to strong growth in underlying EBITDA and two times leverage. Last November, we outlined our priorities for FY26. They were to focus on cost and capital discipline, drive profitable growth in crop protection, and deliver on a reprioritized seed strategy. We have done what we said we would. We improved cash flow and reduced leverage to 3.6 times, and we kept our operating expenses flat. In crop protection, we delivered profitable growth and improved margins. We grew our EBITDA by 6% in constant currency. I perceived EBITDA by 8%, and we significantly improved performance in emerging platforms. We had a good crop protection resource with growth driven by underlying regional strength, partially offset by currency translation and weather impacts. While performance differed by region, what has been consistent is our emphasis on focusing resources on areas where we can generate sustainable margins and returns. That discipline increasingly reflected in earnings quality and cash outcomes and resulted in an increase in EBITDA by 6% in constant currency. Europe was the standout contributor with EBITDA up 17% on prior corresponding periods in local currency, reflecting improved product rates and lower operating costs following the implementation of the performance improvement program. North America, EBITDA increased 11% on prior corresponding period in local currency. Earth Elemental and Canada grew strongly. Volumes in US crop rotation reflected a continued focus on higher value products. Longer regulatory approval processes impacted the timing of new product revenue. AFAC EBITDA declined 15% on prior corresponding period, primarily reflecting why weather conditions in Australia and currency headlines. In Asia, underlying EBITDA grew strongly in constant currency, with Indonesia a key contributor. We are very pleased with seed technologies. EBITDA grew 8%, driven by growth in hybrid seeds and a materially improved result in emerging platforms. Hybrid seeds performed well across all crops, with expansion and scale-up in South America, strong Australian canola growth, and successful new product launches. In emerging platforms, we expanded our off-take agreement with BP to 2050. It positions Carinata to grow at scale under a disciplined capital-light investment model. In omega-3, we reduced cash cost and capital. We are repositioning omega-3 to lower cost of production of America. Europe and China deregulation are on track for 2028. Overall, Steve Technologies is delivering higher quality earnings with improved margins and lower capital intensity. Now, I will hand over to Brendan to take us through the financial result in detail. Thanks, Rico.

As Rico highlighted, this is a strong first half with improved earnings, cash flow, and reduction in leverage. The financials I'll walk through now demonstrate that this is being driven by an improvement in earnings quality and capital discipline, reflecting deliberate actions taken over the past 12 months to reshape the business. Turning to the profit and loss. While revenue was lower year on year, reflecting our deliberate focus on improving mix and prioritising margin over volume, gross profit increased 7% and margins expanded by 3.7 percentage points to 33.1%. This reflects improved crop protection mix, strong hybrid seeds growth and improved performance in omega-3. Importantly, this margin expansion combined with disciplined cost management is now translating into strong operating leverage across the P&L, with margin gains going through to earnings. Operating expenses were broadly flat, with the benefits from the cost savings program offsetting inflationary pressures. As a result, underlying EBITDA increased 18% to $243 million and underlying EBIT increased 32% to $136 million. We also delivered strong growth in underlying net profit after tax of 35% to $52 million, demonstrating the earnings leverage now embedded in the business. Overall, this reflects an improvement in the quality and the resilience of our earnings profiles. which is increasingly translating to cash. Next is balance sheet. We are now seeing a clear inflection from the cyclical peak in working capital seen in the first half of financial year 24, and this improved balance sheet efficiency is supporting a stronger cash generation. Average net working capital reduced by 12%, with a 2.1 percentage point improvement in net working capital to sales, reflecting disciplined working capital management. At the same time, capital expenditure has reduced materially as we transition from a period of peak investment to a lower, more sustainable level. Combined with stronger profitability, this has driven a meaningful reduction in net debt and leverage. Net debt reduced 10% year-on-year, notwithstanding $190 million higher opening net debt position entering financial year 26. The average declined from 4.5 times to 3.6 times, a reduction of around 20%. Overall, the balance sheet is strengthening, with improved working capital efficiency, and the business is positioned to continue to deleverage, driven by earnings and cash generation. On net operating expenses, we are on track to deliver 2025 cost savings programs, with a full period benefit of $50 million captured by this financial year-end. As you can see on the slide, we have achieved $32 million of cumulative savings in operating expenses for the first half of the year. This has offset inflation. Importantly, a significant portion of these savings is now embedded in the current earnings base, contributing directly to underlying EBITDA expansion. These savings have been driven by targeted actions across the business, including performance improvement initiatives in Europe, reduced commercial and support spend headcount is 115 lower than the prior year. Overall, this program is supporting ongoing improvements in margins, cash flow and returns. Turning now to cash flow. Free cash flow in the half reflects the typical working capital bill in the first half. We have delivered 133 sorry, $193 million year-on-year improvement in free cash flow, reflecting materially stronger of underlying cash generation and disciplines of capital management. This improvement has been driven by stronger profitability, improved working capital outcomes, contributing to $103 million and lower capital expenditure. Importantly, this represents a strong lift in underlying cash generation and positions as well for positive free cash flow for the full year as working capital unwinds in the second half. On networking capital, we delivered a further year-on-year improvement, as we continue to deliver sustained improvement from the sixth-year peak in the first half of financial year 24. Average networking capital reduced by 7%, with a six-day improvement in the cash conversion cycle, driven primarily by lower receivable days, resulting in lower funding requirements and improved capital efficiency. As a result, networking capital sales reduced by 2.1 percentage points and is now comfortably within our 35 to 40% target range. This improvement reinforces the progress we are making in embedding capital discipline across the business and working capital will continue to be a key lever supporting free cash flow generation. On capital expenditure, The reduction in our capital expenditure this year reflects our transition from a period of peak investment to a lower, more sustainable level of spend. It also reflects our more focused strategy, which requires less capital intensity and increased discipline around capital allocation. This includes lower spending across manufacturing, a more focused crop protection R&D portfolio, and reduced investment in the omega-3 platform. We are targeting capital expenditure this year of less than $200 million, down from $246 million last year. As you can see, the weighting of spend will be in the second half due to timing of project delivery. The more sustainable capital profile of the business will support improved free cash flow generation over time. On net debt, we've delivered $135 million reduction year on year. notwithstanding a higher opening debt position and some benefit on currency translation, with leverage declining by approximately 20%, from 4.5 times to 3.6 times. This reflects the combination of stronger earnings, disciplined working capital management, and lower capital expenditure. Importantly, deleveraging is now being driven by improved earnings and cash generation, rather than balance sheet actions alone. marking a clear shift in the financial profile of the business. Our funding position remains strong with a diversified, confident line of capital structure. The equity membrane remains solid after supporting seasonal working capital build. Now just some information to help you with your models, giving guidance on some key line items for the full year of financial year 26. Depreciation and amortization approximately $218 million. Net interest expense, approximately $100 million. Foreign exchange hedged expense, second half expense expected to be below that of the first half. Underlying income tax expense, we expect a $20 to $30 million range reflecting country mix. Overall, this results demonstrates an improvement in earnings quality, a materially stronger cash generation, and a stronger balance sheet. This supports our confidence in delivering the full-year outlook. We are now building a more resilient financial profile with improving operating leverage and cash conversion. This provides a strong foundation for continued deleveraging, sustained free cash flow and improved returns over time, and demonstrates that the strategy is already translating into financial outcomes. I will now hand it back to Rico to cover the strategy refresh