Farmers are choosing to skip laying down fertiliser for a year as costs rise, but are still willing to spend on seeds and crop-protection products, the nation's main supplier says.
Nufarm chief executive Rico Christensen says farmers around the world are looking to offset rising fuel and fertiliser prices as a result of the conflict in the Middle East.
"Most farmers, they have options to reduce some of their fertiliser applications," he told an earnings briefing on Wednesday.
Farmers who have done their work in previous years can skip fertiliser application for a year or reduce it without a significant impact on yield.
"What they do not seem to be compromising on is the quality of the yield that they deliver on farms," Mr Christensen added.
Because farmers are focused on high yields, they're willing to pay for the products that Nufarm sells.
"We're not seeing a radical change in how farmers are spending on crop protection and seeds," Mr Christensen said.
The Melbourne-based global seed and crop-protection business reported a first-half net profit of $38 million, up 28 per cent on a year ago.
Its share rose to a one-year high of $2.93 before falling back slightly, to be up 13.3 per cent at $2.90 as the stock market headed toward the close.
Nufarm cut its net debt by $135 million to $1.23 billion in the six months to March 31 and said it would cut spending in certain areas to become a leaner and more focused organisation.
It expects less than $200 million in capital expenditures over 2025/26, down from $246 million the year before.
Mr Christensen said while the industry had evolved into an "everything for everybody" business model, Nufarm was choosing to go in a different direction.
"We are sharpening our focus on where we can win and applying greater discipline on how we allocate capital and resources accordingly," he said.
Unlike some businesses in other industries, Nufarm hasn't seen much impact from the Middle East war.
"We had a little bit of difficulties in sourcing packaging materials in a couple of markets, but all those short-term impacts we saw at the time, we've worked through," Mr Christensen said.
Nufarm reaffirmed its full-year guidance, saying it expects strong earnings growth and a reduction in its leverage to two times net debt, from 2.7 times a year ago.
RBC Capital Markets analyst Owen Birrell said the result was overall in line with expectations, with better-than-expected seed technology earnings and worse-than-expected crop-protection earnings.
As expected, Nufarm didn't declare a dividend.
