A third quarter trading update from Dublin-based agronomy services business Origin Enterprises amplifies its earlier warning on the effect of the exceptionally wet autumn on its revenues. The dry spring period is also impacting sales. In addition, Coronavirus restrictions have severely affected its Amenity horticulture operation.
The company’s first half trading figures, published in early March, had warned of the impact of a sharp drop in winter crop plantings due to the weather. Origin, parent to Agrii, had reported that winter crop plantings in the UK and Ireland fell 40.4% year on year to 1.7 million hectares, a fall of 1.1m ha. It now estimates that only 55% of this unplanted area was sown to spring crops, with the rest fallowed. The total cropped area of 4m ha is 10.7% down on that for harvest 2019.
The following very dry spring weather has reduced crop yield potential, as well as lowering pest and disease activity. Consequently, Agrii says underlying demand for agronomy services in Ireland and the UK fell by 1.5% in the quarter and crop input volumes by 13.9%. It expects full year crop protection volumes to be 25% lower.
Group revenues for the three months to the end of April were €604.8 million, up 1.6% on the prior year’s €595.4m. But at the nine-month stage, Group revenues were 6.7% lower at €1.21 billion. Within the total, UK and Ireland agronomy services revenues fell 8.2% to €372.1m for the latest quarter, and by 15.5% to €709.5m for the year to date. This was partially offset by a 24.7% Q3 increase in Continental Europe agronomy revenues to €196.9m and 10.8% to €338.9 for the nine months.
The weather conditions also impacted demand for fertilisers and animal feed ingredients at Origin’s Business to Business Agri-Inputs division with lower product volumes and margins in the period, especially when compared to a strong Q3 2019.
The Amenity business saw lower volumes and revenues from its busiest seasonal quarter, after the Covid-19 lockdown closed all sporting venues and reduced demand from landscaping and local authority customers. As a result, staff were furloughed on a rotational basis.
Origin’s Continental Europe division, active in Poland, Romania and the Ukraine saw an underlying volume increase in agronomy services of 33.1% and 15.4% for crop inputs in the period. But while the larger planted area in this region was initially favourable for volumes, persistent dry conditions during April and May have since reduced crop yield potential and farm expenditure.
The Latin American business saw a 10.2% fall in volumes in what is the quieter season there, not helped by a delayed start to soya plantings.
“Thanks to the professionalism and dedication of our team, key logistics and warehousing activities have been maintained and agronomy advice delivered, despite farm visits being limited in accordance with social distancing protocols,” notes the Group. “We are grateful to all our colleagues for their efforts in maintaining our operational capability which is enabling us to deliver continuity of service to the agricultural community during this crisis.”
In light of the market conditions and Covid-19 uncertainty, the Origin board has suspended the final dividend for full year 2020. In addition, executive directors have voluntarily waived their entitlement to any unvested share options and have taken a 20% cut in respective fees and dividend base salaries for the April 1st to July 31st 2020, as have board members.
“Extremely dry conditions in the third quarter persisting into June led to significant soil moisture deficits which negatively impacted overall crop potential for farmers and growers, resulting in a lower intensity of crop input investment spend,” notes Origin.
“We expect full year demand will be lower than had been expected at the time of our half year trading update in early March. In what has been a challenging year due to extreme weather conditions and the operational challenges presented by Covid-19, the Group expects to deliver a resilient financial performance for FY20.”