Nufarm Ltd

Thank you for standing by and welcome to the New Farm Limited 1H25 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 1 on your telephone keypad. I would now like to hand the conference over to Mr Greg Hunt, CEO. Please go ahead.

Thank you and good morning everyone. Welcome to New Farm's first half 25 results presentation. Joining me today are Brendan Ryan, New Farms CFO, Rico Christensen, Group Executive Crop Protection Technologies, and Brent Zacharias, Group Executive Seed Technologies. 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. Before I move to our first half result, I'd like to report to you on the review of seed technologies that we've announced today. As we have been discussing with you for some time, within seed technologies, there are significant opportunities for creating value across multiple seeds and tract platforms. Our hybrid canola, sorghum and sunflower seeds platforms have strong market positions and a track record of above market growth. They are delivering more than $200 million in revenue annually with high margins and strong cash generation. We have the leading canola position in Australia and are currently expanding in South America where we see strong growth potential. We have invested heavily in the commercialization of our portfolio of the world's first plant-based omega-3 and we've learned a lot about this technology over the past several years. The omega-3 platform is supported by favorable macro and industry trends, and with additional investment, we believe that it has a bright future over the longer term. Our bioenergy platform is led by Carinata and underpinned by a 10-year market development and commercial offtake agreement with BP that we signed in 2022. With demand for sustainable aviation fuel rising, due to mandates introduced in multiple regions, we see the opportunity to rapidly scale this platform. We also have a pipeline of new and emerging technologies, including Camelina in our Omega-3 platform, EnergyCane in our bioenergy platform, and biomass oil trade technology, which is an exciting development with potential use in bioenergy and FMCG markets. Its potential value is demonstrated by our recently announced research agreement with BP and Unilever. Over many years, we've invested a significant amount of capital to grow seed technologies, growing our hybrid seeds platform and taking Omega-3, Carinata and EnergyCane through the first stages of commercialisation. These platforms and our new and emerging technologies have significant value, however, require additional investment to reach their full potential. We believe that now is the right time to explore alternative structures to support and accelerate growth. We also believe that bringing in outside equity will provide the opportunity for the full value of these platforms to be realized sooner by current shareholders. Based on an initial outreach to potential investors, we are commencing a formal process to explore capital structure options for seed technologies. We will be exploring whole business and platform by platform approaches to maximize value. We have engaged UBS to assist with this review. At this stage, no options are being ruled in or out. There is no certainty that the process will lead to a transaction and we will provide and report back to you on the progress as appropriate. Turning now to the half where we reported underlying EBIT of $103 million, earnings per share before material items of $0.072 and finished the period with leverage of 4.5 times. We saw a strong recovery in profitability from crop protection with underlying EBIT from crop protection up 34% year on year. Our result was negatively impacted by Omega-3, which Brent will speak to in more detail later in the presentation. Outside of Omega-3, seeds performed solidly. We are accelerating the scale up of biofuels to this end We are planning a three times expansion in Carinata area planted in 2025 compared with 2024. We are also growing our hybrid seeds canola, sunflower and sorghum position in South America. At the 24 results, we announced actions to improve return on funds and I'm pleased to report that these actions are well advanced. We are acting to slow cost growth and are maintaining a target of $50 million in annualized run rate savings in overhead costs by the end of financial year 25. At the end of the first half 25, we've achieved a 22-day year-on-year reduction in inventory, and we are well on track for a 25-day year-on-year reduction in inventory by the end of 25. I'm also pleased to see that we are already seeing a noticeable improvement in profitability in our Europe crop protection business. In addition to the initiatives discussed at the full year 24 result announcements, actions are being undertaken to improve free cash flow. At this stage, we expect capital expenditure in financial year 26 to be around $200 million, which is a significant reduction on recent years. That figure includes seed technologies. While Brendan will speak about this topic later in the presentation, I'd like to take a few moments to speak about leverage. We finished the period with leverage of four and a half times. The increase in leverage since the full year reflects a normal seasonal working capital build as well as additional working capital associated with scaling our omega-3 platforms. Some of you will notice and rightly point out that our leverage has been increasing over the past several years. Over that period, we have been undertaking significant investment in our crop protection and seeds portfolios and reinvesting into our manufacturing operations. These investments have delivered improved resilience and performance improvements. We are now at a point where we have largely completed the required investment to strengthen our manufacturing resilience. We are recalibrating omega-3 expansion to balance the pace of commercialization with regulatory development and customer demand. In 2025, we plan to approximately halve the acres planted to omega-3 compared with 2024. And across the business, we have other actions underway to improve networking capital efficiency. As a result of these actions, we see a realistic path back to a lower level of leverage. Applying our capital management principles, which relate to leverage and free cash flow, there will be no interim dividend. Turning to achievements in the first half. During the half, we saw a strong recovery in crop protection which benefited from an improved cost of goods position. We grew volume in all regions. We had strong improvements in EBIT in APAC and Europe, despite some weather headwinds in Australia. In fact, in Europe, we nearly doubled EBIT compared with the prior year. We saw strong cash generation from North America, despite slower profit recovery. We achieved several important milestones in our crop protection product pipeline. We announced an agreement with Kinga Group for the development of a new proprietary non-selective herbicide for the Australian market. The active ingredient has shown promising results as a standalone knockdown herbicide and has the potential to be a very important tool for Australian farmers because it controls several key hard to control weeds. We had another solid performance from hybrid canola in Australia, despite drier weather reducing sales year on year. During the half, we grew our canola position in South America, a growing market in which we hold a significant market share and which now represents a meaningful part of our global canola volume. South America is an example of a market where we are able to gain synergy across product range and genetics from Australia. We completed a successful Carinata program in South America. We also obtained additional Carinata certifications and renewals, which filled GHG value credentials. Turning to the balance sheet, we achieved a material reduction in our average net working capital sales, which now sits within our target 35% to 40% range. The improvement was mainly driven by lower inventory in crop protection. We formed new agreements with Unilever and BP announced in late 2024 to progress the development of biomass oil, a world-leading innovation and a significant IP estate and research program targeting sustainable oil production for biofuels and FMC applications. And we have continued to make good progress with respect to the expansion of our Carinata program with BP. In Australia, we entered a collaboration with Hort Innovation on the development and launch of a precision application robotic sprayer manufactured by Kilter, which will have application in intensive, high-value crop markets. Turning to the performance of our segments in more detail, APAC revenues increased slightly on the prior year with good seasonal conditions across Asia and strong uptake of new products in Indonesia, offsetting dry conditions in Australia. Even increased 34% with a more stable pricing environment for active ingredients, driving margin normalisation and a strong profit recovery in Australian crop protection. We secured rights to develop a new broad spectrum non-selective herbicide that we are targeting for launching the Australian market before 2030. And as I said, this is a significant and exciting opportunity to address a very significant need for farmers who are dealing with the growing challenge of herbicide resistance. In North America, we reported EBIT down 10% year-on-year. North America has been slower to normalise than other regions. Pricing pressures, a delayed season and just-in-time buying negatively impacted the result and volumes. Cash generation was strong, driven by year-on-year inventory reductions. We finished the period with an improved cost of goods position and believe that we are well placed for year-on-year growth in the second half. We achieved a significant year-on-year reduction in networking capital sales driven by lower inventories. In relation to tariffs, this has been a volatile and very uncertain environment. Many of the products that we import from China are exempt from the reciprocal tariffs. For those that were subject to higher tariffs in the six-week period up until last week's announcement to reduce the reciprocal tariff level to 10%, we took the decision not to import, and this could have some impact on sales in the second half. In Europe, we reported EBIT of 43 million, nearly doubling on the prior year. We experienced a strong recovery in sales and profitability, and benefited from positive cropping conditions across the region. We have improved manufacturing reliability at WIKE, however experienced ongoing margin pressure. We achieved a significant year-on-year reduction in networking capital to sales driven by lower inventories. Turning to Sea Technologies, where we reported revenue of $249 million and underlying EBIT of 15.9 million. The decline in EBIT on the prior year was due to lower licensing revenues, lower margins in omega-3, and drier conditions in Australia. In hybrid seeds, we had solid performances from canola, sorghum, and sunflower, although Australian canola was impacted by recent dry conditions. Sorghum volume increased year-on-year, and sunflower was broadly in line with prior year. The fish oil market has seen a significant reduction in pricing over recent months, which has impacted sales and profitability for AquaTerra, leading to a negative 28 million write-down of omega-3 inventories in the half. In this environment, as I said earlier, we have reduced the production program for 2025 and are undertaking steps to reduce cost of goods. In Carinata, we concluded a successful crop year in South America with production in Argentina and Brazil. The 2024 South American grain harvest is in the process of being shipped to Europe for crush and sales via our partners. We achieved additional Carinata proof of sustainability certifications which build the GHG value of our Carinata. The production program for 2025 Carinata crop is in progress. and we expect to significantly increase production hectares and zones across South America. Before handing over to Brendan, I'd like to summarise our near-term priorities. We are clear on the actions needed to improve profitability, generate higher returns and de-lever the balance sheet. We are embedding a culture of continuous improvement with clear targets and enhanced governance to drive improvement efforts. We continue to accelerate actions towards improved return on funds and cash flow. We have made good progress on actions to realise the $50 million in annualised run rate savings by the end of 2025. We delivered a 22-day year-on-year reduction in inventory days at the half and are on track for a 25-day year-on-year reduction in inventory by the end of financial year 2025. With the completion of major works at our manufacturing plants, we are now moving to a lower capital expenditure envelope, which we expect to be around $200 billion in financial year 26. So we are through peak capex. We expect to update you on our review of seed technologies towards the end of calendar year 25, and I'll now hand you over to Brendan.

Thank you, Greg. Good morning, everyone. Revenue for the half increased 3% year-on-year. Underlying gross profit margin increased by 50 basis points year-on-year due to a solid recovery in crop protection, underpinned by stabilizing active ingredient prices. Gross margin for omega-3 declined year-on-year. Underlying EBITDA was $206 million, a decrease of 6% year-on-year. And underlying EBIT, $103 million, a decrease of 15%. year-on-year. Note that we are moving to using EBIT as our primary measure of operating profit. Statutory net profit after tax was $30 million. Year-on-year decline in statutory net profit was primarily due to omega-3 and portfolio expenditure. We are pleased with the progress in reducing average net working capital to sales, which is an important measure of our efficiency in using our balance sheet. Average networking capital to sales was 39.2%, driven by disciplined inventory reduction in crop protection. Improvements in crop protection were partly offset by an increase in omega-3 oil and grain inventory. Networking capital in seed technologies at the end of the half was approximately $75 million higher year-on-year. Overall, the results for average networking capital at 39.2% is a substantial improvement on the prior year. Underlying earnings per share before material items, 7.2 cents per share. Return on funds employed was 3.2%, compared to 3.6% to the prior year. Overall, relative to the prior year, a strong crop protection result on revenue, underlying EBITDA, and networking capital, offset by mega-trade reduced earnings and net working capital bills. At March 25, net debt was $1.362 billion, an increase of 12% on the prior year. The increase in net debt was due to lower profitability of capital expenditure program, the impact of omega-3 on net working capital and currency translation. Importantly, Funding headroom at the balance day was at $265 million, noting March is the peak brought down on seasonal funding. Our asset-backed lending facility is an important aspect of our liquidity management, which is secured against receivables and inventory, and flexes up and down to accommodate movement in these balances. Net leverage was 4.5 times underlying EBITDA, compared to 3.6 times in the prior year. Leverage was impacted by higher net debt and a lower rolling 12-month EBITDA. Excluding omega-3 and currency translation impacts, the leverage ratio would be approximately 3.8 times compared to the reported 4.5 times. I make this reference in the context of our response plan to deleveraging. There is a solar plan to reduce net debt and leverage. Using the charts here to represent the actions we are taking to do leveraging. On the debt aspect, we are reducing the scale of omega-3 program to balance the pace of commercialization with regulatory developments. We are continuing the focus and strong momentum on networking capital reduction, in particular on inventory management. In terms of capex, Significant investment has been made in our manufacturing plants and seed technologies growth platforms of Omega-3 and bioenergy over the past three years. We have now moved through peak capex. Financial year 26 target capital expenditure is circa $200 million. We will continue to have a seasonal build the half year and the significant unwind in the second half. Moving to the EBITDA aspect of leverage, we do not expect Omega-3 to have the same negative impact that it had on this result. Our cost savings program, 50 million run rate, is expected to mitigate cost growth. And we expect organic earnings growth supported by our portfolio of new product introductions. These actions are expected to improve free cash flow generation and reduce net debt. In terms of timing to net debt reduction, we expect financial year 25 net debt to be above financial year 24, largely due to current year omega-3 impacts. Financial year 26 largely benefits from the actions outlined above to have us operating within the target leverage range of 1.5 to 2 times underlying debt. The review of seed technologies could also provide a catalyst to materially deleverage. Plant protection revenue growth of 4% was supported by volume growth across all regions and a favorable shift in product mix, partly offset by softer pricing, reflecting the lower active ingredient prices year on year. Revenue from seed technologies decreased by 2.7% year on year. This line was mainly due to prior conditions in Australia negatively impacting canola revenue. Licensing revenue was also lower year on year. The charts on operating cash flow and net working capital illustrate the seasonal nature of the working capital, which peaks in the first half and significantly unwinds in the second half of the financial year. At the end of the first half, net working capital was $100 million below the prior year, reflecting a strong improvement in crop protection, partly upset by additional inventory on expansion of Omega-3. The half-year net operating cash flow movement was an outflow of $459 million. The primary reason for this cash outflow was a seasonal networking capital build, as we experience every half-year. Cash inflow in the second half of financial year 25 is expected to be consistent with the unwind of networking capital of previous years. In terms of the components of networking capital, I've already mentioned the significant improvement in inventory performance. Performance with respect to trade receivables continues to reflect strong discipline on commercial terms in a competitive trading environment and strong collections performance. Trade payables continued to normalize as business moved to more normal cadence of replenishment. These working capital improvements have resulted in a significant improvement in the average net working capital to sales at 39.2% from 47.1% in the prior year. At the FY24 briefing, we committed to a 25-day inventory reduction. At the end of the first half, we have reduced inventory days by 22 days, measured on a rolling 12-month basis. Discipline focus on the key levers of demand forecast accuracy, supply planning, supply chain agility, and inventory turnover is expected to enable the continued momentum in this area. We expect to achieve our target of a 25-day reduction in inventory days by the year end. This excludes any carryover of a migratory product that we may choose to hold in the second half. Capital expenditure for the six-month period was $148 million compared to $110 million for the prior period. The year-on-year increase is largely due to timing of spend. Capital expenditure for the full year is expected to be around $240 million. The increase above the $230 million expectation given at the full year is due to strategic investment opportunities that arose with Yield 10 Camelina acquisition and King of Groot herbicide agreement for the Australian market. These investments are captured within intangibles. Underlining capital spend was rationalised. However, the benefit of this is expected to be offset by currency translation from a weaker Australian dollar. Property plant and equipment investments focus on plant reliability and safety-critical programs, with substantial reinvestment into phenoxy manufacturing at WIKE. While there is some residual investment required in the second half, as Greg stated earlier in the presentation, we expect to reduce the rate of the investments in the future. I would now like to hand you over to Brent Zacharias, who will provide an update on Omega-3 canola platforms.

Good morning, everyone. We have had a very challenging period for our Mega 3 business. I would like to take you through our development journey, why we are where we are, and why we believe in the future prospects for this platform. Several years ago, we made a decision to begin growing our Mega 3 program ahead of achieving deregulation in key markets. As we launched our 2024 production campaign about 18 months ago, Fish oil markets were at all-time highs, close to $7,800 USD per metric ton for Peru, 24% omega-3 oil, and $5,300 per metric ton for North Atlantic, 18% omega-3 fish oil. At that time, industry consensus expected prices to forward correct by approximately 25% to 30%. and remain very tight in supply even with recovery of the Peru quotas. In recent months, Peru, the largest fish oil supply region, has announced two quotas which combined represent the largest quotas granted since 2012. This has resulted in a significant increase in supply and prices falling about 70% from peak for certified sustainable oils. The increase in supply is shown by the leftmost chart on this page. In 2024, we saw the second largest Peruvian anchovy quota in the past 10 years. This was followed in April 2025 by the second largest first quota over the same period. Those quota increases have had a significant impact on pricing. The price impact is shown in the second chart from left. There are various reference prices that can be used. We have tried to simplify by focusing on two reference prices. The North Atlantic price is a benchmark for sustainably sourced fish oils. In April, the North Atlantic reference price was 15% below the five-year average. There are other benchmarks in the market as well, and we have shown in the chart a Chile blended import price. The average price of fish oil imports reported into Chile last month was approximately $2,300 per metric ton USD. This was 15% below the North Atlantic price. While aquaterra is a sustainable oil, in untypical times when the market is long in supply like today, we are having to trade at competitive spot market levels into Chile. This has created the $28 million AUD inventory value adjustment that we have noted in our accounts at the half year. We are currently assessing market options for moving inventory for the remainder of the year. Over the long term, we are confident in omega-3 demand. We are confident because over the long term, fish oil supply is constrained despite the temporary impact of above average Peru quotas. We are working towards the acceptance of Aqua Terra, which is a GM product which supports entry in the higher value European market. Growing demand for Omega-3 is expected to continue to be driven by aquaculture production, rising incomes, urbanization, and dietary trends. Now let's turn to where we are with our Omega-3 program. The current market environment has highlighted the need to refocus on ensuring not only production stability, but also cost efficiency, and therefore the key goals over the next few years are to optimize our production zones and drive down cost of goods to ensure the long-term profitability of our oil products through pricing cycles. To achieve this, we are focused in three key areas. One, improving our technology from an agronomic performance perspective. Two, progressively reducing logistics and stewardship costs. And three, looking to optimize production zones and supply routes. As it relates to agronomic performance, we validated meaningful grain and oil yield improvements with new generation hybrid genetics, which has enabled us to reduce grower premiums by 37% in our 2025 contracts, enabling cost of goods reduction for oil sales in 2026. Secondly, our truck, rail, and storage logistics costs have been relatively high based on our production zones, distance to crush, and our commitment to maintain a separate grain supply chain from standard canola for stewardship purposes. As we optimize direct-to-crush production zones, our logistic costs have already come down 9% overall in our 2025 footprints and are expected to drop more significantly as we further shift in 2026 and 2027. And thirdly, and most significant, as we have stated previously, upon fully completing our regulatory approvals, we will be able to shift larger proportional volumes into significantly lower cost production and logistic position countries such as South America and Australia. Deregulation is expected to drive a step change reduction in cost of goods and we are working to obtain regulatory approvals in the appropriate markets. We have conducted pre-commercial production trials in Australia and the results support a lower cost of goods position. We have also applied for permission to conduct stewarded trials in Argentina and are assessing other South American countries. We have also completed trials in Chile under cooperation with a government program also demonstrating strong performance. Our experience with hybrid canola genetics across the southern hemisphere suggests that we should expect to see strong performance. The potential to produce within Latin America for the Chile market is expected to drive substantial advantage in cost efficiency. The combination of these three initiatives provide us a pathway to sustained profitability and our continued pursuit to be the most scalable and cost-efficient omega-3 alternative to fish oil. Over the last several years, we have learned a lot about our technology and have established a significant revenue and customer base. In summary, whilst we are in a tough market today, the market fundamentals and need for this technology remain strong. we're also expediting clear and meaningful steps to drive cost improvement. Over the next several years, as we progressively establish those production cost positions, the next phase of commercialization will be focused on serving dedicated customer agreements with a balance of best cost production zone and targeted volume delivery. Thank you. I will now hand back to Greg.

Thanks, Brent. Just some closing comments before we move to Q&A. So we had a solid start to the year in crop protection. We feel that we're well positioned. However, several uncertainties could impact the second half. If the current weakness in fish oil pricing continues to hold, we expect that EBITDA from seed technologies for the second half to be around $20 million below the prior year. Due to lower than anticipated fish oil prices, we no longer expect to achieve 100 million in revenue from omega-3 in financial year 25. We are currently assessing options for managing omega-3 inventory, which will influence where revenue and inventory lands for the full year. While we saw a good improvement in crop protection in half one, there are a number of uncertainties that make it difficult for us to project the second half. The US tariff situation is fluid and it's creating uncertainty with respect to supply, demand and pricing outcomes. We believe that we are well positioned with our supply chains and manufacturing operations at Wyke and Laverton. However, the potential behaviour of the broader industry creates some uncertainty. Although we expect some benefit from our UK and Australian based manufacturing products, the benefit is likely to be relatively small because of the increased volume imported in anticipation of tariffs being implemented. The anti-dumping duties applied to China and India 2,4-D products, which are in place for five years, will likely provide some flexibility for our Australian manufactured products. Europe experienced strong recovery in the first half, supported by favourable seasonal conditions and actions that we took to begin right-sizing the cost base. We're not expecting the same rate of improvement in the second half. Australia benefited from a more stable cost of goods position in the first half, and we expect that to continue with the caveat in respect to potential tariff impacts that I mentioned earlier. However, a continuation of current dry conditions in Australia would negatively impact second half. Management remains focused on reducing costs and improving return on capital. We are on track to deliver a 25-day year-on-year reduction in inventory, excluding the impact of Omega-3. And we're on track to deliver $50 million in run rate annualised cost savings by the end of financial year 2025. In relation to other financial items for the full year, we now expect capital expenditure to be around 240 million. The increase since the full year outlook is due to our decisions with respect to Yield 10 and the Australian Herbicide Agreement with King of Green. Excluding these items, we would expect to come in at approximately 230 million in constant currency terms. We expect DNA of around 220 million, a net interest expense of around $95 million, including the cost of FX hedging. Despite the setback for this year with omega-3, we have delivered a solid first-half result and are confident in the future. Grain prices have improved from recent lows. Stocks-to-use ratio for major grains remain tight. Planting conditions in major markets are generally positive and demand for seed and crop protection products remain strong. Active ingredient prices are generally stabilised and channel inventories are at low levels. We have a strong pipeline of differentiated products with several key products anticipated to launch by 2028. We maintain a leading position in Australia with our canola varieties and are experiencing continued growth for our hybrid seeds in South America. We see a pathway to long-term profitability in our Omega 3 canola platforms. Fish oil prices are at five-year lows. We will manage production to reflect industry conditions and continue to advance regulatory approvals and cost of goods reduction. We anticipate strong growth in bioenergy. The adoption of SAP mandates in the European and other markets gives us confidence in the demand for biofuels. Increasing Carinata plantings in 2025 for 26 oil and sales. Brent Zacharias and Rico will be joining Brendan and I for Q&A and I'll now hand back to the operator.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2 and if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from John Pertell from Macquarie. Please go ahead.

Good morning, Greg and Brendan. Just had a couple of questions, please. Obviously, the SEEDS Tech review, I suppose the question is to why now? I'm going to appreciate there's different parts to the SEEDS business, but I suppose the why now when fish oil prices are depressed and understanding that there are short-term versus longer-term perspectives, but you're obviously at a depressed earnings level, certainly for the Omega-3 business.

Thanks for the question, John. I guess when seed technologies was a smaller business, we think it made sense for it to sit within New Farm and be funded by the cash flows that we generated from the crop protection business. But now that it's moving to the next stage of growth, it really requires more funding than can be provided by New Farm alone. So we think the best solution is to bring in outside capital and support that next stage of growth. We have, over recent times, received some inbound interest and given the need for capital to continue to grow and support that growth, we think now is the right time to explore those opportunities. In relation to omega-3 specifically, as Brent called out, it has been impacted by temporary oversupply. But we think the longer term demand for Omega-3 is positive and it can't be supplied consistently by wild fish. So we believe that our technology at scale can be a sustainable and competitive source of supply. And I guess our view is that sophisticated investors will look through the temporary situation and hopefully see what we believe is long-term value in that platform.

Thanks, Greg. And just a second question on the Australian business. Obviously, you've referenced some dry conditions there. Can you just talk to the outlook for the second half? I appreciate that's still sort of playing out. But also any sort of, I suppose, there's seasonal effects and maybe anything sort of structural there, you know, from increased China imports, if indeed they look to find other homes outside of the U.S.? ?

Well, I think as we said, we have seen improved margin because of lower colds. The dry conditions have impacted trading since March, so in April and May. I'd say the rest of Asia, so Indonesia and the rest of Asia is pretty much similar to last year. And we do have some flexibility you know, with our 2,4-D products. I mean, we will prioritise supplying the domestic market, but where, and we will have, additional production, we will look to put that into the North American market to maximise returns. So I guess it is difficult to call at this stage. I think we believe that on our current forecast that Australia can probably, sorry, APAC, will deliver a similar result in the second half to what we experienced last year.

Thank you.

Thank you. Your next question comes from Owen Beryl from RBC. Please go ahead.

Yeah, thanks, guys. Maybe if I turn attention to North America, the market over there seems to be sort of struggling, I guess, on the floor. You know, we were sort of, I guess, getting the sense of some green shoots in terms of demand coming through earlier this year. And while we hadn't seen it in price, I think there's an expectation of price to start to recover. I'm just wondering if that is still the case and this, I guess, poor market environment at the moment is just temporary uncertainty or is there something a little bit more structural that's going on there?

Yeah. Thanks, Alan. Thanks for the question. Look, no, I wouldn't say it's structural. I think the market there continues to operate on a just-in-time basis. Certainly the uncertainty around tariffs has created some cautiousness around channel purchasing. But I think with channel inventories at low levels, we would expect to see a second half due to improved volume. So I guess sort of unlike Australia where I'd say we would expect to see something similar in the second half, I think we're well positioned for an improved second half in North America based on increased volumes.

And is that comment based on the fact that you said that there was a delayed season? in North America, so a delay obviously means that it kicks off later and then impacts the second half. Is that the reason you're confident in that?

Yes, that's correct. So the season's running probably two or three weeks later than normal. So sales that we would normally have seen in first half, what I'm saying is, why don't we pick up some of those in second half?

And can I ask you about the competitive environment over there? Because obviously then when we look at the pricing on that volume, You've obviously got a fair number of competitors out there chasing that volume. Are we expecting to see that demand pull prices up or should prices really continue to sort of remain underwhelming into the second half?

Yeah, no, look, I think it is. You're correct. It is a very competitive environment. So I would expect to see volume increase, but I'm not expecting to see a significant improvement in margin

That's excellent, thank you.

Thank you. Your next question comes from Jonathan Snape from Bell Potter. Please go ahead.

Yeah guys, two questions. I might ask him in two lots because the first one is a pretty easy one. I just noticed this time I couldn't find the payables. financing utilization in the first half. Are you able to provide that number as to what was in those off-balance sheet facilities?

Thank you, Jonathan. Yeah, supplier financing, the balance state was approximately 125 million Australian dollars, which is pretty consistent with, I guess, the position it was at the full year last year.

Great. Thank you. And look, the second one's around the SEEDS side of the equation. Look, I noticed the other week, I think UPL sold another 12.5% stake in their Advanta business, which I think was like a look-through valuation of almost $2.8 billion US, if I'm doing the maths right. And that was for a business, I think, that was doing about $140 million in EBITDA, which I don't think is too dissimilar to what they sold that stake for to KKR a couple of years back in terms of a multiple. Like, it's getting up near 20 times. When you've started this process, are you looking at, or has the inbound interest been around kind of multiples that we can look at elsewhere? Because I know it actually got in the books at like 950 and you haven't impaired it at all. But it just seems like there's some big transactions going on and I'm just trying to figure out if that's maybe what's prompted this or if it's, you know, the performance factor.

Well, it's certainly not the performance. As I said earlier, I think we've got a unique and scalable, of scale at the moment. I just don't think we're going to be commenting specifically on valuation expectations. As I've said, I think we've got very valuable platforms, a strong earnings base, from our hybrid seeds business and future potential growth in bioenergy and omega-3. And I guess the process will allow us to assess value of various growth opportunities, whether it's the whole business or whether it's hybrid seeds canola or whether it's a bioenergy platform. I'd say that we've made significant investments in building these platforms over I guess over the last five years, you know, we've invested nearly $300 million in CapEx, which roughly comprises nearly 30% of the CapEx investment that New Farms invested over that period.

May I ask in a different way? The $950 million, am I doing the maths right in terms of what that's carried out at the moment as, I guess, the net assets of that seed technologies platform? And when you, I guess, started this process, I imagine you did an evaluation test against that to see whether you should be impairing it or not. Is that an accurate comment or not?

Yes, Jonathan, I'll just comment on that. I guess in terms of the hearing aids impact that Omega-3 came through this year, that did... initiate a review of the carrying value of the asset and we did the appropriate testing and review of the carrying value relative to recoverable amount and then that had headroom for no need for an impairment or an adjustment to that value.

Yeah, but is the book value 950 of the total platform? I'm just going through your segment notes. Is there stuff buried in corporate? I can't see.

Yeah, my estimate, let's come back here to confirm with you, I don't think it's as high as 950. My number is sort of more in the 750-800 range, but we can confirm that back to you.

Great, thank you.

Thank you. The next question comes from Evan Karatsis from UBS. Please go ahead.

One of you guys, apologies if these have been us, struggling a few calls. With the crop protection price headwind at $75 million, at current prices, I assume you have some visibility into this, but when does that stop becoming, I guess, a headwind for the group, please?

Yes, it's $75 million and a half, I guess, back to Greg's comment earlier. I guess it's very hard to predict and estimate when, I guess, the recovery to long-term averages will happen. In terms of, I guess, stimulus in the market around demand, we are seeing the growth and inventory positions be stocking. But I guess the unknown is when do we see that sort of price come back up. So I guess in relation to the North America account, we continue to see probably gross margin holding. That's in terms of a rate percentage. Revenue will be influenced more by volume as opposed to pricing.

Yeah, okay, got it. That makes sense. And then just on the tariffs and the impact there, I get that it's obviously a moving beast. Do you want to maybe just provide some just a bit more information, just how do we think about the impact from tariffs in North America to New Farm? maybe if you can, any sort of range of dollar million and how you're seeing the impact on farmer demand as well if it leads to higher prices too.

Yeah, look, thanks, Evan. I think that the point I'd make there is that, as I said in the prepared remarks, a lot of the products that we import from China are actually exempt from the tariffs. So the current tariff 10%, but all of the products do have a 20% fentanyl tariff. And I think the view is that those additional costs will simply be passed through to customers. We've got a 90 days pause on reciprocal tariffs, so I don't expect that we're going to see a significant impact in the second half. The only thing that I did call out earlier, in the six-week period where there were 125% tariffs, we took the decision not to import products. Now, that could impact sales in the second half because we simply don't have tariffs. Sorry, we don't have the stock. The third bucket is the 2,4-D anti-dumping and countervailing duties. So they were introduced, I think, from memory sometime in May. and are at about 150%. That does provide, and that's on 2,4-D, that does provide some flexibility for our Australian 2,4-D once we've satisfied the demand in the domestic market to put volumes into the North American market. But I would see that more as an impact in 26 simply because I think there was some front-running volumes into the U.S., in expectation that those dumping duties would be introduced as they were in, I think it was in May. So more of a, given that they're in place for five years, more of an impact in 26 and beyond.

Yeah. Yeah. Okay. All right. Thanks, Greg. Appreciate that.

Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Andrew Scott from Morgan Stanley. Please go ahead.

Thank you. Good morning. Greg, I just want to sort of focus on the balance sheet. I mean, four and a half times net debt to EBITDA. In response to Snapey's question, there's off-balance sheet items. There's the step-up prefs as well, which I know don't come under a covenant guise, but they're relatively expensive financing. How can you get us comfortable that this is an appropriate balance sheet?

Thanks, Adrian. Just on the leverage, as I covered off earlier, the critical points, I guess, is one, we have a funding structure that is covenant-like. We have passed through our peak borrowing requirement at the balance date, so therefore we don't have an issue just around liquidity. The reasons for the increase in the debt are related to Omega-3 and some currency translations. And there is a timing aspect there around CapEx expenditure as well, which from a full-year perspective comes back relative to, from a full-year perspective, around $240 million. So I outlined, I guess, the actions that we are taking to deleverage, which is around the CapEx reduction. It is around that we don't scale it back on Omega-3, that it won't have the same impact in terms of working capital and earnings. There's also the aspect around the cost savings in terms of getting that run rise up to $50 million at the end of the year. And then the likelihood is we'll also see some, from an earnings perspective, the new product introductions that they have continue to help on the earnings front. So the benefits of all those actions, I guess, will largely come into FY26. in terms of then bringing us back to that leverage range of 1.5 to 2 times on the line EBITDA.

Okay, thank you. And then just a second, the stock's down 25% at the moment. There seems to be a meaningful miss versus the street at EBITDA. I'm just wondering why we're hearing this for the first time. Is it that you actually feel the full year numbers are broadly consistent and we're just getting the skew wrong? or why are we only hearing about this today?

Yeah, just from a disclosure perspective, it's always top of mind, and we carefully consider that on a day-to-day basis. I guess the reference points around expectations do vary, I guess, across the market. Our expectations on EBITDA in that regard was $230 million, so in terms of underlying EBITDA for the half, it was circa around 10%. And I guess, you know, in terms of the overall result for the full year, there's a lot of uncertainties, particularly, I guess, two key ones around fish oil pricing, where that is today and where potentially that would be from an outlook perspective. And then particularly across, I guess, the tariffs in terms of those changing in dynamic nature, which actually changes day by day, week by week. So I guess they were the considerations that we've considered over the This and I guess this is when we reflected I guess our narrative around the outlook.

Okay, thank you. I'll leave it there.

Thank you. There are no further questions at this time. I'll now hand back to Mr Hunt for closing remarks.

Well, thank you everyone for your time today and we look forward to catching up with some of you over the next few days. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.