Ohio And Netherlands Fertilizer Facilities Will Advance Sustainable Farming

Key Takeaways

• Expansion in specialty fertilizers and water treatment aligns with global trends, supporting revenue growth and enhanced market positioning across core segments.
  
• Strategic investments in innovation, operational efficiency, and partnerships position Tessenderlo for future margin improvement and stable long-term earnings.
  
• Margin pressure, cash flow constraints, and growth risks stem from supply chain disruptions, heavy CapEx needs, slow new product adoption, and regulatory uncertainties across core segments.

Catalysts

Engages in the agriculture, valorizing bio-residuals, machinery, mechanical engineering, electronics, energy, and industrial solution businesses worldwide.

• Recent expansion with new liquid fertilizer production facilities in Ohio and the Netherlands positions Tessenderlo to benefit from rising global food demand and the need for higher agricultural productivity. As these new plants scale up and market adoption of their innovative crop nutrition products grows, this can drive higher revenues and improved margins over the next several years.
  
• Growing emphasis on sustainable agriculture and precision farming is supporting strong performance-and future growth-in the company's high-value, specialty fertilizers and crop protection solutions. As these products gain wider market acceptance, Tessenderlo is well placed to move up the value chain and generate margin improvement in the Agro segment.
  
• Heightened awareness of water scarcity is fueling demand for the company's water treatment solutions, especially in their Kuhlmann and DYKA businesses. As regulatory and infrastructure trends push for more efficient and sustainable water usage, Tessenderlo's established presence can translate to increased revenues and stable margins in the medium to long term.
  
• Ongoing investments in proprietary manufacturing processes, product innovation (e.g., digitalization of machinery, new specialty materials from acquisitions like Osterwalder AG), and value chain integration position the company for enhanced operational efficiency and cost optimization, supporting future net margin expansion and earnings stability.
  
• The planned joint venture with Darling Ingredients to form Nextida taps into growing demand for collagen-based health, wellness, and nutrition products. Successful execution and synergy realization from this partnership could deliver structural EBITDA and earnings growth starting in 2026 and beyond.

Tessenderlo Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tessenderlo Group's revenue will grow by 4.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.0% today to 4.7% in 3 years time.
• Analysts expect earnings to reach €145.1 million (and earnings per share of €2.12) by about September 2028, up from €-27.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.1x on those 2028 earnings, up from -56.6x today. This future PE is lower than the current PE for the GB Chemicals industry at 22.7x.
• Analysts expect the number of shares outstanding to decline by 2.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.82%, as per the Simply Wall St company report.

Tessenderlo Group Future Earnings Per Share Growth

Risks

• Persistent geopolitical risks and disrupted supply chains, such as the need to shift MOP (muriate of potash) sourcing from Russia/Belarus to Canada, have increased transportation costs and raw material uncertainty, causing sustained pressure on Agro segment margins and thereby threatening long-term profitability and earnings stability.
  
• Declining margins in historically strong business lines (notably Agro and Picanol) highlight vulnerability to global price volatility, inflationary input costs, tightening market cycles, and sector-specific uncertainties-potentially resulting in suppressed revenue growth and compressed net margins over the coming years.
  
• Heavy reliance on CapEx, both for mandatory maintenance of aging assets and strategic growth, is likely to weigh on free cash flow and could stress the company's balance sheet, limiting flexibility for shareholder returns or further growth investments and thereby impacting long-term earnings and net debt position.
  
• The need for significant market education and ramp-up of novel product lines (such as new liquid fertilizers in Europe and the U.S.) exposes revenue to slow adoption cycles and potentially suboptimal utilization of newly built facilities-a drag on return on invested capital and EBITDA until market penetration accelerates.
  
• Exposure to regulatory, permitting, and environmental risks-particularly for energy projects and industrial operations in Europe-could derail major growth initiatives or JV completions, increasing execution risk and threatening forecasted revenue and net income contributions from new ventures (such as T-Power post-RWE and Nextida's eventual formation).

Valuation

• The analysts have a consensus price target of €28.333 for Tessenderlo Group based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.1 billion, earnings will come to €145.1 million, and it would be trading on a PE ratio of 13.1x, assuming you use a discount rate of 6.8%.
• Given the current share price of €25.9, the analyst price target of €28.33 is 8.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.