Nufarm Ltd

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

Thank you, Brendan. I will now discuss our strategy refresh before covering Outlook. When I think about New Farm and talk to farmers and channel partners across the world, what stands out is the instant brand recognition and respect that people have for our business and the depth of the relationships we have built over more than 100 years of doing business. We are known for our solutions and our commitment to being easy to do business with. We are a leader in key geographies in core crops and key product segments. We are known and respected for our innovations across crop protection and seeds and supporting customers with solutions as the agricultural industry continues to evolve. Our strategy refresh will see us take the best of what we have and what we do and apply more focus to drive better returns for our shareholders. Over time, Our industry has evolved into an everything for everybody business model. We are choosing a different direction. What we are articulating is not only choosing what we will do, but also what we will not do. We are sharpening the focus on where we can win and applying greater discipline to how we allocate capital and resources accordingly. First, we are prioritizing capital more effectively reallocating toward markets where we have a track record of strong returns and a competitive advantage. This also means exiting assets and portfolios when they don't align with our strategy and returns discipline. Second, we are improving the quality of earnings and returns in crop protection. This is about narrowing our focus on crops and markets, and as has been evident in this result, we are placing a greater emphasis on margin over volume. Our portfolio renewal will continue to come from partnerships that deliver innovation in a capital-lighted model. Third, in hybrid seeds, we have a high-quality business with a clear path for growth. In emerging platforms, we have a unique position with technologies that are sought after and supported by strategic partners such as BP. Here, we have taken a more disciplined approach to investments to support growth and group returns. Overall, this refresh is designed to support stronger cash flow and improve margins and growth in overtime. In FY26, we remain focused on disciplined delivery, completing the previous 50 million cost savings program announced in FY25. resetting our CapEx targets to below $200 million and continuing the path toward lower leverage. A strategy refresh creates the basis for additional efficiencies. In April, we announced further cost savings of $50 million and expect to achieve the run rate by the end of FY27 and the full benefit in FY28. In FY27, we expect to sustain CapEx at a similar level to FY26. Beyond that, our objective is to sustain cost-to-free cash flow, continue improving growth, and operate the business within a leverage range of around 1.5 to 2 times. Collectively, these objectives reflect the financial discipline embedded in the strategy refresh and our focus on improving returns and cash generation across the cycle. I want to share a bit more detail on the new cost savings program. The focus in the FY26 program is centered around two areas. The first is the rationalization of assets and portfolio, and the second is around operational efficiency and changes in our operating model. The anticipated cost savings are spread across reductions in internal cost of goods and SG&A. I want to emphasize that we are not relying on external reductions in cost of goods to achieve the savings target. The FY26 program is expected to have cash implementation costs of $15 million waiting towards FY27. We expect to achieve the run rate savings by the end of FY27 with the full benefit coming through in FY28. In our crop protection business, we have taken several actions as a result of the strategy refresh. First, we are narrowing our portfolio focus around fewer crops and re-prioritizing capital toward markets where we can consistently earn returns above our cost of capital. Second, we are actively rationalizing assets to better align the footprint with that portfolio. This includes the closure of the wide brochure facility and closure and sale of the Kwinana site. Further footprint options are being assessed. We are also rationalizing the portfolio in North America to prioritize higher margin products. In doing that, we are deliberately foregoing some revenue in the short term and focusing on growing higher margin products as evident from our first half results. Third, we are driving ongoing operational efficiency reducing fixed cost, capital intensity, and complexity. Collectively, these actions are designed to redeploy capital to higher returning activities and deliver more resilient margins and returns over time. In Z Technologies, we are also taking action to improve capital discipline and returns while preserving the long-term upside. We restructured the portfolio into two distinct operating models. reflecting very different routes to market, customer archetypes, and capital profiles. In hybrid states, the focus is on scaling our highest returning platform with a strong southern hemisphere bias. It is a traditional business-to-retail model where we influence growth decisions at the farm gate. Actions on the way include streamlining the European sunflower business through a licensing model and expanding in South America Both aim at improving margins and returns while capitalizing on the rising global demand for plant-based offerings. Emerging Platforms is a business-to-business model relying on selective and unique strategic partners. Here, we have taken a deliberately more disciplined approach. In Carinata, growth is being supported through our expanded partnership with BP under a capsule-like model. In Omega 3, we have reset to a lower cash spend and are undertaking a staged approach with production and deregulation progressing in a measured way while keeping the long-term growth prospects intact. Together, these actions are designed to sharpen returns while maintaining strategic optionality. This brings us to our strategic priorities that continues to be cost and capital discipline, drive profitable growth and crop protection seed strategy. To help us do that, we have listed some specific actions which will work. The first is the additional cost savings program of $50 million, which we have provided detail. We've also made really good progress on resetting our capex to a healthier level and reallocating it towards our chosen markets. It also remains a continued focus to improve our earnings quality and lift free cash flow. In crop protection specifically, we are shifting portfolio mix towards higher-margin products. In the US, we built a solid plan to improve returns, and now in the early stages of execution. In Europe, we saw really good progress in improving our margins and returns this first half, and now we are focused on maintaining that momentum. In SEEDS, we are building up the new operating model around the two distinct businesses, while at the same time expanding our hybrid seeds business across the southern hemisphere. We are aligning our investments to a return-based focus without losing sight of the long-term growth prospects in emerging platforms. This brings me to our outlook for FY26. We are reaffirming our outlook for this year, expecting strong growth in EBITDA. compares to 2.7 million for end of FY25. We also expect positive free cash flow, driven by the normal seasonal unwind in working capital, and we are targeting capital expenditure of less than $200 million. In crop protection, we are expecting continuing growth in EBITDA, improving on the first half growth rate, driven by continuing margin improvement and cost savings. In seed technologies, we expect a strong growth in EBITDA from hybrid seeds and a $40 million improvement in EBITDA from emerging platforms, resulting from our expanded offtake agreement with BP and improved omega-3 performance. With that, Brenda and I, together with Rachel and Beth, will be happy to take questions.

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. If you're on speakerphone, please pick up the handset to ask your question. Your first question today comes from Owen Burrell with RBC Capital Markets. Please go ahead.

Good morning, guys. Rick, I wanted to draw you out on one of the comments you made around the US crop protection market where you've said you've got a plan to improve returns and that's currently being executed. I'm wondering if you can give us a bit more colour around what the strategies that you've implemented in that North American market.

Yeah, thanks for that question. So it comes back to what we talked about during the presentation, which is really around the focusing on our portfolio. So we're changing the crop strategy and our portfolio strategy. So in doing that, we're rationalising the portfolio we have in the US market. and then leading them towards more higher-margin products. That's going to change the margin profile of the U.S. crop protection business.

Are you able to give us a sense of some of those products that you're leaning into?

Maybe. There's a long tail of products in our portfolio in the U.S., and I think what we're looking at are really the products that are more commoditized, some products that have become... more commoditized or used and lost their relevance in the market. Those would be the ones that we're looking at. But I'll also ask maybe Beth to help explain a little bit about what we're doing on our portfolio and crop strategy.

Thanks, Rico. Maybe just a little bit more detail on our crop strategy. Our focus is aligning our crop strategy around three key markets, cereals, soybeans, and tree nuts and vines, globally to drive growth and margin improvements by concentrating resources on those key groups. This represents the most treated and market value within crop protection. It also leverages our strength in post-patent solutions and value-added mixtures across the regions, with particular emphasis on cereals and soybeans in major markets like Europe, North America, APAC, and LATAM. Most of our current pipeline sales are linked to these three crop groups, highlighting their importance and focusing on these crop groups allows sharper portfolio prioritization, streamlined registrations, better ROIs, and concentrated R&D efforts. Specifically, our manufacturing footprint in phenoxys is equally important to us supporting these key crops. So it's a key component of many cereal and soybean products currently on the market. So even when prices swing, acreage stability in these key two crop segments provides support base volumes, which improves asset utilization and manufacturing and overhead.

That's excellent. Just one last question from me around the cost-out programs. The 26 cost-out program, 50 mil. The 27, another 50 mil. I'm just wondering, is this a sort of, I guess, a line in the sand that we should think about going into the future? as a cost-out target required to continually offset inflationary pressures.

Yep, thanks all, Brendan here. On the 2026 cost-out problem, you can see from what we presented today, we've made very good progress in the delivery to date and that was largely focused around SG&A and we're all planning to deliver the remaining of that benefit in the second half. In regards to the additional $50 million As Rico mentioned, as part of the strategy refresh, that is a more broader base in terms of going across the value chain. As Rico indicated, some of that benefit will be coming through in terms of cost of goods or manufacturing conversion costs, as well as in our SG&A. There will be some reduction in our fixed cost base. We'll continue to drive the efficiency in the cost base that we have. Some of those benefits will be offset by inflationary pressures. That's an element that's hard to predict but will be present I guess on the go forward. So overall from a cost perspective in terms of a theme in the strategy refresh is controlling the controllables in terms of cost management, being disciplined around where we spend our money in terms of the benefit and the returns it provides. and we continue to be focused on our continued efficiency right across the cost base as we go forward.

OK, thanks.

Your next question comes from William Park with UBS. Please go ahead.

Good morning. Thanks, Victor and Brendan, for taking my question. Can I just ask about the trends that you've seen across different geographies in the first two months of second half today? particularly around sort of the weather-related impacts and, I guess, the farmer economics there. Thank you.

Yeah, thanks, Will. So, as we mentioned, we are seeing good momentum in April and May in our business across all regions and businesses. In terms of the weather update, we've... We've seen, obviously, we don't have that elusive normal year as we always talk about. There's always a mixed picture of things happening here and there. But lastly speaking, the weather conditions have been normal to that extent. So in Europe, we've seen a little bit of late spring in parts of Europe and then flooding in a couple of regions. southern markets, and in North America, we also had a late spring this year, so we're probably running three or four weeks behind from normal season there. And then in APAC, we've seen also dry weather impact in the beginning of the year, and now in the last couple of months, including in March, we saw some good rainfalls at at the right time of the season from our perspective and also in the right geographies.

Thank you. Can I just also ask about your strategy? I mean you talked about how you're now chasing, I guess you're not chasing revenue but you're more focused on earnings quality. you know, if I sort of look across your global peers, they're talking about somewhat muted sort of revenue correcting the crop protection space driven by volume. And I'm not sure, I mean, it kind of ties in with my first question around farmer economics. I mean, given the cost inflation and and diesel prices and all these things that are sort of outside of their control, is there a risk that there is a flight to kind of lower-priced, more commoditized products versus some of the premium products or higher-priced products you're talking to?

I don't think so. I think what's happening around the world is that, yes, there is concern among farmers around rising costs. fertilizer costs particularly. I think most farmers, they have options to reduce some of their fertilizer applications if they have done their work in previous years. So you can skip for a year or reduce in a year without a significant impact on yield. So they're doing that. They also have other options to reduce their cash spend on the farm. And they are going through all those different options just as we do. When we are running investments, they are looking at cash flow also. What they do not seem to be compromising on is the quality of the yields that they deliver on farms. So farmers continue to be focused on delivering high yields, which means that they are investing in seeds. They are investing in crop protection to help protect their crops because once the investment is made, you planted your crop. you need to ensure that you can harvest it and get those yields you're looking for. So I don't think we see, we're not seeing a radical change in how farmers are spending on crop protection and seeds.

Thank you. And then just in terms of how you're thinking about, I guess, your cogs in the crop protection business, if I look at some of the recent moves in the Ag Chem prizes, coming out of China that there's been a pretty meaningful improvement there, just how you're sort of thinking about benefits of the prices moving upwards, flowing through to the business?

Yeah, so a lot of that change we're seeing out of China is obviously driven by the conflict in the Middle East that has an impact on their energy costs. What we've not really seen is a short-term impact on our business. And traditionally, we've been very good at translating those cost increases into higher prices of our products. And we'll continue to manage that development coming out of China, not just this year, but also next year.

Thank you. And then just one last question from me. How should we be thinking about, I mean, I've noticed that the licensing revenue in the half has jumped. How should we be thinking about sort of the licensing revenue profile going forward?

The licensing revenue, yes, year on year, but there has been some movement. It primarily relates to, you know, our emerging platforms segment of the business that will kind of being typical to what you see in the first half going forward. That's sufficient for him.

Thank you.

Thank you. Your next question comes from Ramon Lazar with Jefferies. Please go ahead.

Good morning, guys. Thanks for taking my questions. Maybe just one to start with on the growth platforms. Could you just give us an idea of the initiatives to reduce those break-even costs for Omega-3, and where do you see those new costs relative to a break-even price, if you can maybe talk around that?

Yeah, thanks for that question. So we've also talked about that in previous settings, and what we're doing is really two things. The first one, maybe start by saying it's not only about reducing cost of goods, it's also about reducing the cap expense. So what we did last year was we took a hard look at the cap expense and also off expense we have around the emerging platforms, and We took action on that, and we saw some of that also happening last year. But in addition to that, we also decided to relocate production to South America. And in doing that, we expect to see a lower cost to produce because of that decision. And then lastly, we're also awaiting the deregulation in China, which will provide an additional cost savings to the Omega-3 products.

Okay. Any idea you can give us on that breakeven price relative to where it's been previously given those initiatives?

We don't normally dispose the breakeven price. We obviously have competitors in the market that are also listening to these calls, so we don't normally dispose.

Okay. Second question, just on the leverage guidance for the full years around that two times, it does imply a significant net working capital unwind in the second half. Maybe if you can help us bridge that unwind in the second half for key drivers and how to think about leverage heading into the new year as well.

Thanks, Mo. Brendan here. So we've confirmed in terms of leverage for the end of financial year 26, there will be a two times EBITDA. The drivers of the ability to achieve that leverage is probably the networking capital. And as you mentioned, the networking capital unwind in the second half. That's typical to what we've seen in past years, which is largely driven by cash collections, effectively the reduction in receivables from the sales made in the first half. There will be some inventory improvements also, and as you can see from the first half, we've driven some working capital efficiency with a reduction in the cash conversion cycle. It'll be also supported by a lower level of capex year on year. The weighting of that is the second half that's largely the reason of the project delivery. and it also will be supported by your stronger earnings relative to last year also. In terms of looking beyond this current financial year, one of our messages around the focus on the continued commercial levers around driving better cash conversion in the business, sustaining the lower level of capital expenditure, continuing the improvement pathway that we have now sustained over approximately two years in driving lower working capital for the business and better cost control and lower cost profile. So that's important, I guess, overall in terms of the strategy refresh. We're building a better quality business with a stronger balance sheet, which will be leading to continued deleveraging over time.

Okay. Thanks, Brendan. One other one, just on the CapEx, that's now more aligned with DNA around that 200 mil level. Is that a sustainable level, you think, for the business for the foreseeable future, just given, I guess, some of the initiatives you've talked about in terms of rationalising product SKUs and the focus on more efficient capital deployment in the seeds businesses?

Yes, we believe so. Maintaining a lower sustainable level of spend of less than $200 is what we see for the business. Relative to the prior periods, which was following a period of sustained investment, particularly around the manufacturing asset base, that's passed in terms of the requirements there. We've also looked at the emerging platforms, communicated there will be lower investment, particularly around the media trade, as we've repositioned that business.

Okay, thank you.

The next question comes from John Birtle with Macquarie. Please go ahead. John Birtle, your line is now live. Please proceed with your question. We will move on to the next question. Your next question comes from Ollie Reg with Sissy. Please go ahead.

Good morning. I was just wondering if you'd make a comment on channel inventory balances across the supplier chain. We're hearing these have been drawn down given the input cost inflation. I was wondering if you could also just touch on how you guys are managing inventory with the risk that the Stratafim was opened and this could see AI prices fall sharply.

Thank you. Yeah, so we are also seeing that inventories have been drawn down across the world. Obviously, people are have to replenish their inventories with the cost we see out of China. So we are also doing the same, we're seeing the same in the channel partners that they are looking also at inventory management.

Okay, and could that have benefited your margins in the first half?

Could you repeat that?

Couldn't really hear it. You know, you're drawing down this lower cost inventory. Could that have driven your margins in the first half or is the timing not quite there?

No, the change in the margin in the first half is more related to our decisions around rationalizing portfolio. We also had a little bit of change in portfolio mix driven by some of the delays we saw in North America in the season.

Great. Thank you. Just the last one. So the US crop protection, you're going for the portfolio rationalization there. Australia is also quite a big market and is also quite competitive here. Is there further rationalization you're doing in other geographies?

We've been pretty disciplined in rationalizing the portfolio in Australia over the last few years. On a global level, on any given year, we typically rationalize around 10% of our SKUs, so that's the normal rate. That number is going to be higher this year, probably even closer to 20%, mostly driven out of what we're seeing in North America.

Thank you.

Your next question comes from Jonathan Snape with Bell Potter Securities. Please go ahead.

Yeah, hi, guys. Can you hear me okay? Yes. Great. First question, can I start around Omega-3? Obviously, you've upgraded the guidance today on that side of the equation. That looks like it's somewhere around about a couple of hundred bucks a tonne on pricing, if I remember the sensitivities right. But if I look at the market, I mean, when we were here in November last year, the pricing... in Peru and Chile was around that $2,500, $2,700 a tonne. If I look at it today, it's around $4,600, $5,000 a tonne, and it just holds for fishing off the coast of Chile and it holds for the 30km off the coast of Peru. So it looks like the backdrop's getting better than it was six months ago relative as well to the pricing that it looks like we're taking up. So I guess my first question is, you know, Am I right in the sensitivities around pricing that it looks like has been incorporated into guidance? And I guess the second question is, you had a US $90 million facility for where you are at the balance date last year. How are you finding the markets actually selling through this stuff at the moment? And are you finding anyone more interested in doing longer-term off-take agreements?

Hi, Jonathan. Brendan here. In terms of the short pricing, like we actually said, we have seen an increase in the pricing from six months ago and affirming overall. And that benefit has flowed through in terms of the pricing for our product in terms of Equiterra. We have sold some volume in the first half and plan to sell some more in the second half. There is a balance there in terms of optimising between the short and the longer term opportunities. Overall, in terms of the quarter prices, there is, in terms of those, they are spot prices, they are somewhat volume dependent as well, but overall no dispute in the fact that the fish oil pricing has been firming and has increased over the past six months. And in terms of our outlook, lifting it from $30 million to $40 million on the emerging platforms, the predominant reason for doing that is related to that factor. In terms of the $90 million facility, we have been doing sales, and we plan to do some more sales in the second half, so that will support the ability for us to repay that long, part of that long $45 million in September of this year. And then it was the full maturity of that in September 27.

All right. And, look, I thought some of the questions you've been around active, as a matter of fact, if I looked at... I think about your business, you mentioned the net long in March each year. Prices since March have probably rallied in active markets nearly 20%. In an Aussie dollar sense, I guess a little bit more in US dollars. I guess what people are trying to figure out is if there are almost like a free carry into the second half that, you know, obviously people have been landing or would be landing now higher-priced stock that is competing against lower-priced stock. Obviously, you wouldn't have seen any in the first half. Are you seeing any benefit for that in the second half at all in that you're effectively carrying lower-cost inventory relative to where spot pricing is right now?

So as we talked about, there is a little bit of what we talked about earlier, which is that there is a little bit of an inventory online going on in the sense that people are hesitant to replenish costs. But I don't see, certainly not in our case, we're not going out and doing what you could refer to as, you know, predatory pricing, anything like that, taking advantage of the overall market situation by adding pricing. That's not what we're doing. What we actually are doing is what we talked about earlier, is we're seeing the effects on the portfolio rationalization coming through in our margins by eliminating some of those low margin products from our portfolio. That's really what's driving most of the margin increase. And then combined, as I said, we have some We have a little bit of phasing going on from the delay in the spring in North America. That's also reflected in that change in margins. But that's really the situation we have.

Okay. And maybe just one last one, because I think I noticed an account that couldn't find the off-balance sheet facility utilization this time. Are you able to share what that number was in the first half? Is this material contributed to cash flow or not?

Jonathan, that number was $62 million and up to half. That is a financing facility available to our suppliers. Also, effectively, they're classified as neutral in terms of cash flow tax. All right.

Great. Thank you.

Our next question comes from Belinda Moore with Morgans. Please go ahead.

Good morning, team, and great to see a strong improvement in the first half result. Just turning to the omega-3 price, can you say what your new assumption is in guidance versus sort of the previous 2,600? Then can you sort of turn to the crop protection and just sort of talk about where you're seeing sort of the most upside, what regions in the second half, and then how we should think about corporate costs And then lastly, what are you expecting to realise from asset sales, please?

Hi, President Brendan here. I'll address your Amiga 3 question, corporate costs. So on Amiga 3, you know, the position that we had at the end of this time last year in September, it reflects effectively the current prices at that time. In terms of how we're in position to imagine platforms in the Amiga 3 component of that within the platform, it reflects... current prices at this moment in time. In terms of corporate costs, they're probably flat at the heart, and we expect that to be the same result at the end of the year. You know, past the record, just around.

Yeah, so as we talked about in the script, we saw a really good momentum in April and May, and those are big months for us. So that also gives us confidence that we refurming the outlook, that's one piece, but also that we're actually seeing an improved growth margin around improved earnings, I should say, around crop protection in the second half. And then also because we had the impact of the dry weather conditions in Australia in the first half, which we are not expecting to see in the second half. So that's what changed the result in the second half.

And just in terms of asset sales, how we should think about potential proceeds, please?

Potential what, sorry? Potential proceeds. I guess to end on the asset sales and proceeds, it's too early to determine a value around that. You have the recent announcement in terms of the closure and sale of Kronana. That closure is expected in May of next year. in regards of any other active rationalisation or portfolio rationalisations of their pending decisions that will become a due course.

Thank you. Our next question comes from Scott Ryle with Rimmer Equity Research. Please go ahead.

Hi there. Mine's actually a quick question. Rico, you talked to the impact of customers some of their cost increases that they're incurring. You talked about your ability to pass on the increase in price at inputs. I'm wondering if you're seeing any potential shortages on the horizon for critical inputs into your products, please, and if you can talk to what you're doing to manage some of those risks if you're not prepared to say which particular chemicals they are. but just talk more generally about what you're doing to ensure that you've got product. You're clearly doing a good job of passing through the cost increases, but just in terms of making sure that you're in production at all times, please.

Thank you. I think it's an interesting question, and if we go back and look at what happened when the conflict first broke out in the Middle East and the changes it caused on supply chains. We saw very, very little impact. We had a little bit of some difficulties in sourcing packaging materials in a couple of markets. But all those short-term impacts, we saw at that time. We've worked through that. And whatever impact there is on some of the raw materials that are based on petroleum and so on, that has already been mitigated. And it's also reflecting in the fact that we are reaffirming our outlook for the four years.

Yeah. Okay. Great. Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from John Pirtle with Macquarie. Please go ahead.

Good day, Rita and Brendan. Hopefully you can hear us this time. Thank you. Just had two questions. Thank you. Firstly, just on the broader ag chem industry, it's obviously been a very competitive space over the last few years. What are you now seeing in terms of a more rational environment or otherwise?

That's a really interesting question, John. So as I said in the script earlier, we We feel like the industry has evolved into an everything for everybody kind of model, which is possibly part of the reason why there has been these problems with generating results the last few years. We do see that some companies are beginning to act more focused, and I think that's going to be a positive trend for the industry overall. Nevertheless, there is, of course, still the question of the cost to serve. And I think that some companies are struggling in improving their cost to serve. I think we have been really focused on controlling what we can control in our business in terms of delivering the balance sheet, but also reducing our cost to a more sustainable level, which is what we're focusing on right now. So I can't speak to exactly what are the decisions other companies should be doing, but as I said, we're focusing on what we can throw and making sure that we are reducing our cost to serve and taking the right actions around our portfolio and be more focused on those parts of our portfolio and those markets where we know we have a right to win.

Thank you. And just a second question for Brendan on FX. What are you assuming on FX in your second half earnings guidance? And also, obviously, there was the 10 mil FX hedging loss there in interest. Just a bit of colours to what that relates to. Thank you.

Yeah. Hi, John. Just in terms of the composition of their financing expense in the P&L, if we look at the breakdown, our external interest in terms of borrowings has reduced by a couple of million. And yes, as you point out, from an FX perspective, that has increased half and half. It particularly got some more bearable volatility around the commencement of the Middle East conflict, and that sort of has influenced the impact of that. So we still continue to have a consistent hedging policy in terms of managing exposures. In terms of the second half, we do see some stabilisation and therefore we've moderated what we think the impact will be in the second half. Sorry, was there a second point to your question, John?

Yeah, it was just around what you're assuming in your second half earnings guidance for EFX. Probably from an earnings translation viewpoint.

Yeah. So we are expecting it to be less than what the impact is on the first half, so you can take that to be approximately half of what the impact was in the first half.

And that's on the interest side, Brendan?

That's, sorry, on the FX expense.

Yeah. Thank you.

And overall, in terms of net interest expense, we advise that if the But potential year 26 numbers will be approximately 100%.

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

Thank you, Asti. So, once again, just reiterate the results here. We're very satisfied with the result we've achieved this first half. We are reaffirming our outlook for the full year. As I said earlier, we saved those priorities for this FY26 back in November, and we're delivering on those priorities in terms of improving free cash flow, reducing leverage, and growing profitable products. So again, thank you for listening in. Also, thanks to Our teams across the world will help us deliver this result, and thank you so much.

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