Nufarm (ASX:NUF) appears to have navigated a series of challenges that have weighed on sentiment over the last 18 months. These include a falling agricultural chemical prices, margin pressure in key crop protection markets and challenges in Seed Technologies.

This has led to a recovery in the share price since the release of results for the six months to 31 March 2026 (1H26) in May. Accordingly, we recently researched the Company in The Dynamic Investor to assess whether NUF is a more attractive investment.

About Nufarm

Nufarm is a leading crop protection and seed technologies company. NUF develops, manufactures, and distributes a range of herbicides, insecticides and fungicides for crop protection. The crop protection business primarily operates in the off-patent segment of the market and is focused on major agricultural markets in Europe, North America, and Asia Pacific (APAC).

NUF has formulation and manufacturing facilities in nine countries, marketing operations in over 30 countries. It distributes its products in ~100 countries across Australia & NZ, Asia, North America and Europe.

The Seed Technologies business covers Nufarm’s hybrid seed operations, including canola, sorghum and sunflowers. It also covers the emerging industries portfolio, which spans bio-energy crops and plant-based Omega-3.

Key Fundamental Drivers

Key Price Indicators Remain Positive

The past 24 months have been characterised by an oversupply in global agricultural chemical (AgChem) markets, alongside the sharp deterioration in Omega-3 prices. Pleasingly, it now appears both price indices have at least stabilised.

AgChem prices have lifted 20-30% in recent months. At the time of the 1H26 results release in late May, pricing for active ingredients for herbicides, fungicides and insecticides on average has stepped up by ~20% since the end of calendar year 2025. NUF’s Crop Protection prices were +1.5% in 1H26 and this should accelerate in 2H26. However, the Company didn’t indicate a material positive 2H26 benefit to earnings net of higher Cost of Goods Sold. This likely reflects some conservatism, given the potential for AgChem prices to fall in the event of an end to the Middle East conflict.

However, as a near-term resolution to the conflict now appears unlikely, we expect the earnings benefit from higher AgChem prices in 2H26 to exceed management’s expectations at the 1H26 result release. This assumes AgChem prices remain supported.

The recent upward momentum in benchmark fish oil prices (from US$2,700/t to > $4,000/t) reflect reduced Peruvian catch quotas. Peru has set a 1.91Mt quota for the first 2026 anchovy fishing season in the North-Central zone, starting in April. This represents a 36% decrease from the 2025 first-season, which had a bumper 3Mt quota.

Mixed Seasonal Conditions

North America is seeing a late spring, while conditions are mixed in Europe. In Australia, a better-than-average chance of rainfall over August to October 2026 is a positive for trading conditions in Crop Protection. However, the emerging risk of El Niño in coming months creates seasonal risk for NUF’s APAC business. This is because Australia typically sees below-average rainfall during an El Niño event, as farmers postpone purchases or trade down to lower-cost products.

Margin Improvement & Cost Savings to Support Earnings Growth

NUF reiterated that it expects to deliver strong underlying EBITDA growth in FY26 assuming normal seasonal conditions and market conditions. Margin improvement and the delivery of cost savings are the key drivers. Notably:

• NUF has a number of new products in Crop Protection development pipeline with product launches and registrations spread across biologics, synthetics and adjacent solutions. These are expected to have a favourable positive impact on margins in FY26.
• The Company’s $50m cost saving program relates to the optimisation of the Company’s manufacturing footprint and product rationalisation and manufacturing costs. NUF said that the cost savings will be progressively phased to reach the full run-rate by the end of FY27. In line with the cost-saving initiatives, NUF is actively rationalising assets to better align its footprint with its portfolio. NUF’s currently elevated level of portfolio rationalisation (~20% vs typical ~10%) is a key differentiating factor in comparison to its peers. This could result in NUF continuing to deliver an elevated Crop Protection margin profile.

Fundamental View

We highlight several factors warranting a cautious view:

i. NUF shares are currently trading on a 1-year forward P/E multiple of ~17x, which is in line with the 5-year average (~17x) and slightly below the average over the last two years of ~18x.

ii. Notwithstanding the strong earnings recovery expected out to FY28, there needs to be more evidence of continued earnings quality and meaningful margin expansion. In other word, management need to deliver on the strategic shift to focus higher-margin products as opposed to volume.

iii. The elevated gearing level (currently 3.6x) is likely to remain an overhang on the shares. This is because the 2H26 period will be crucial in determining whether the gearing level fall to the targeted level of 2.0x by the end of FY26.

Charting View

When we last looked at the chart on 5 May in The Dynamic Investor, we noted that it was trading sideways and we were looking for an upside break for it to start to look positive. NUF broke higher in late May before easing back to test the breakout zone in the form of a bull-flag. It appears to be recovering from that retest which means that the share price can head higher from here in the short-term. A break under $2.60 would be viewed as a negative.

 

Michael Gable is managing director of Fairmont Equities.

 

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