The international agronomy services group Origin Enterprises has reported preliminary increases in operating profit and revenues from its latest full year of trading, despite the “very challenging growing season” in the UK and Ireland.
The Group returned an operating profit of €71.2 million on revenues of €1.63 billion in the year ended July 31st 2018, compared to €70m and €1.53bn in the previous twelve months. It says revenue growth was driven by increases in fertiliser and feed volumes and fertiliser prices, while there was a 2.7% rise in underlying volume growth for agronomy services and crop inputs.
The UK and Ireland business, which includes Agrii, Origin Fertilisers and the RH Hall feed materials wholesaler, saw operating profit rise 2.5% to €54.8m on sales 8.7% higher at €1.04bn (€53.4m and €0.96bn in 2017). Profit from associate and joint ventures was 65% higher at €7.2m.
The late spring constrained Q3 agronomy input volumes, but “robust catch up activity” in the final quarter saw a substantial recovery of volumes. The company expects higher crop values to offset lower yields from harvest 2018, and to have a positive influence on farmers’ planting intentions for harvest 2019.
The Group’s digital agriculture segment performed well, with its Contour agronomy platform now covering over 700,000 hectares across all European operations, and set to grow further in 2019.
Volumes, revenues and profitability were all up for Origin Fertilisers, with the business successfully meeting the “highly concentrated and delayed application window” this spring. There was also strong demand for late season fertilisers as grassland farmers acted to increase forage stocks after the exceptionally dry summer. The Bunn Fertiliser acquisition, completed a year ago is now fully integrated into Origin Fertilisers and contributing positively.
The lack of grass also benefited RH Hall with increased demand for feed materials due to higher livestock numbers with better output prices, combined with the need for supplementary feeding as dry weather reduced pasture growth. Feed manufacturer John Thompson & Sons, the Belfast-based business in which Origin has a 50% share, also had a “very satisfactory” year.
The Origin Amenity horticulture business delivered a good performance, despite lower volumes due to the spring and summer weather patterns. Results were lifted by recent acquisitions and the wider service offering they have brought.
Origin’s Continental Europe division, comprising businesses in Belgium, Poland, Romania and the Ukraine, returned an unchanged operating profit of €16.2m on revenues 8.5% higher at €431m. Poland also suffered from the late spring and dry summer, but efficiency gains improved results there despite lower volumes. Performance in Romania was strong, but the Ukraine business was affected by currency volatility and input price inflation.
Earlier this year, Origin acquired a fertiliser blender in Belgium – like the UK operation, it also benefited from increased demand as grass growth slowed.
Origin’s recent investment in Brazil – it has bought a 65% stake in Fortgreen and a 20% holding in Ferrari Zagatto, has led it to form a new Latin America division for future financial reports.
“Origin achieved a very satisfactory full year result -the business performed robustly while supporting our customers to manage the operational demands of a highly challenging growing season in 2018,” says group chief executive Tom O’Mahony.
“We have seen steadily improving sentiment on-farm over recent months, which may be challenged in the UK by the uncertain nature of Brexit and its timing. The Group is well positioned to capitalise on its scalable and diversified business platforms, development opportunities and strong cash generation.
“It has been a significant year in terms of strategic developments including our entry into the Latin American market. The agreement to acquire Fortgreen and Ferrari Zagatto in Brazil provides tangible growth opportunity in markets that address the Group’s requirements for further geographical diversification and seasonality balance.”
Looking ahead, the Group says that the “steadily improving sentiment on-farm over recent months may be challenged in the UK by the uncertain nature of Brexit and its timing”. But it believes that the more international nature of its business leaves it less exposed to a UK market disruption, with the company “well prepared for any short-term logistical disruption that may result from a no-deal Brexit”.