Balanced Portfolio Recommendation: Sell (stop-loss) Nufarm (NUF)

Summary of Nufarm Limited’s August 2024 Trading Update:

Nufarm Limited has revised its guidance for FY24 due to ongoing challenges in the industry environment, which have persisted into the second half of the fiscal year. The key updates are:

1. Underlying EBITDA is now expected to be in the range of $300 million to $330 million, down from the previous guidance of $350 million to $390 million.

2. Net leverage is anticipated to be around 2.5 to 2.7 times underlying EBITDA, compared to the prior guidance of 1.5 to 2.0 times.

3. Net working capital at the end of FY24 is expected to be approximately $500 million below 1H24 levels.

4. Omega-3 revenue for FY24 is forecasted to be around $50 million, with expectations for more than doubling in FY25.

The revision in guidance is attributed to a temporary downturn in the industry, causing competitive pressure, adverse pricing, and product mix impacts, particularly affecting the North American and European crop protection businesses. Despite these challenges, Nufarm remains optimistic about returning to growth in FY25 with more normal trading conditions. Further details will be provided in their FY24 results on November 14, 2024.

***Trade Plan ***

Sell: >3.97

We have been in and out of NUF twice in the last year.

Exiting at 3.97 is a total loss of 11% 

The significant increase in the leverage ratio, in such a short period, compared to previous guidance shows that management have lost control of the budget. 

WE STRONGLY RECOMMEND EXITING AND RE-ASSESS NUF AT A LATER DATE WHEN THE FINANCIALS STABILISE