Origin Enterprises has reported sharp increases in profitability and revenues from its latest full year of trading. But it expects the current financial year to return to more normal levels after last year’s exceptional demand for feed ingredients and fertilisers.
The Dublin-based Group made an operating profit of €82.26 million on revenues of €1.8 billion in the year ended July 31st 2019, compared to €71.19m and €1.63bn in the previous year – respective increases of 15.6% and 10.5%. Including associate and joint ventures, operating profit was 13.4% higher at €88.88m.
The Ireland and UK division, which includes Agrii, Origin Fertilisers and the RH Hall feed ingredients business, returned an operating profit of €60m on sales of €1.16bn – up 9.5% and 11.7% on the €54.8m and €1.04bn from the previous year.
Agronomy service and crop input volumes grew by 6.8% year-on-year, driven by strong demand for crop inputs with “robust” arable crop activity in the spring, plus advance sales of crop protection products whose registrations expire this year for use in the 2020 season. The year also saw higher feed and fertiliser volumes as a result of the poor grass growing conditions in 2018. But the company reports a 10 basis point fall in operating margins to 5.2%, mainly due to the increased fertiliser volumes and prices, which partially offset margin growth across the rest of the agronomy services and inputs portfolio.
The Group’s Integrated Agronomy and On-Farm Services segment recorded higher volumes, revenues and margins, driven by the favourable weather and weakness of sterling lifting on-farm crop margins. The agronomy portfolio increased its share of high value and speciality crop business in the period.
Origin consolidated its digital agriculture activities under the Rhiza brand early in 2019. The service now covers over one million hectares and is on target to reach 4m hectares by 2023.
Within the Business-to-Business Agri-Inputs segment, Origin Fertilisers saw volumes and profitability rise in the period with good weather and stable prices lifting farm purchases. At the same time the full integration of Bunn Fertiliser, acquired in 2018, enabled it to provide wider soil fertility and crop nutrition services.
The Feed Ingredients business benefitted from exceptional demand in 2018, as producers sought to supplement poor grazing and low conserved forage stocks after the dry condition that year. Those volumes were also helped by higher livestock numbers and stable dairy returns. John Thompson & Sons, the Belfast feed manufacturer in which Origin has a 50% shareholding, delivered a “very satisfactory” performance in the period.
Origin’s Amenity horticulture business saw lower revenues and profits in the full year, as the dry 2018 weather led to reduced product use, leading to higher customer inventories and less replacement sales. But this fall was partially offset by new customer business and the first contribution from the organic crop technology company, Symbio, acquired in November 2018.
The Group’s Continental Division, which covers its agronomy services in Belgium, Bulgaria, Romania and the Ukraine, made an operating profit of €13.9m on sales of €440.01m in the latest year, compared to €16.2m and €431m in the previous year – a respective decrease of 14.5% and rise of 2.1%. A combination of low liquidity and high inventories lead to a very competitive market in the Ukraine, which offset good performances from the other country markets in the segment. The Group has taken a €7m exceptional charge, priority due to the challenging market conditions in the Ukraine during the period.
Origin’s Latin American division, established through acquisition a year ago, made its first contribution with a full year operating profit of €8.1m on sales of €33.6m.
“Our business has performed well in the period with the Group benefiting from favourable organic and acquisition growth,” notes Origin chief executive Tom O’Mahony. “The FY19 result reflects our commitment to maintaining a diversified business portfolio with an excellent first-time contribution from Latin America together with the benefit of good demand levels in Ireland and the UK more than offsetting the impact of a more challenging operating environment in Continental Europe, where highly competitive trading conditions within the Ukrainian market impacted profitability.
“Demand for agronomy services and crop inputs for Ireland and the UK is expected to normalise in FY20 and to be lower than the above-average market demand levels experienced in FY19. Fertiliser and feed demand is not expected to match the demand created by the fodder crisis in the first half of FY19. Our Continental European and Latin American segments are expected to grow in FY20 in line with our long-term guidance. Against the backdrop of the uncertain nature of Brexit and its timing, we continue to prioritise a prudent approach to risk management and capital allocation.”