The exceptional weather experienced in the 2019/20 arable crop season in the UK and Ireland has significantly affected Origin Enterprises’ full year profitability and revenues. The Group is confident that demand for its agronomy services and inputs will return to more normal levels for the 2020/21 season but warns that Covid-19 and the end of the EU withdrawal transition period in December could have an impact.
The Origin Enterprises Group has reported an operating profit of €44.01 million on revenues of €1.59 billion for the year ended July 31st 2020, compared to €82.26m and €1.80bn in the previous year – respective falls of 44.5% and 11.6%.
The Ireland and UK division, which includes Agrii and Origin Fertilisers, saw operating profit drop 61.1% to €23.3m on sales down 16.5% to €967.9m (€60m and €1.16bn in the prior year). The underlying volume for the division’s agronomy services and crop inputs fell by 14.4% in the period.
The business blames “prolonged unseasonal weather conditions in Ireland and the UK for lower volumes, revenues and margins across service and input portfolios”. The exceptionally wet autumn led to a 10.7% drop in total plantings year-on-year and a significant shift from winter to spring crops, with the latter affected by the prolonged dry period from March to early June. The lower intensity of crop input spend due to the changed cropping mix saw margins fall to 2.4% from 5.2% a year earlier, while the limited pest and disease pressure from the dry spring led to a 20.3% reduction in the company’s crop protection volumes.
Origin Fertilisers recorded lower volumes and profits in the UK and Ireland during the period, in line with the reduced cropping profile, although activity levels on-farm picked up in the second half. Lower global fertiliser values as the year progressed also affected revenues and margins. The year saw the company introduce the UK’s first independently validated carbon footprint calculator, NUTRI-CO2OL, allowing it to quantify the carbon footprint for each of its 13,000 plus fertiliser blends. It says it will continue to focus on developing and promoting enhanced efficiency fertilisers and bespoke crop nutrition.
The Group continues to roll out its digital agronomy and precision farming offer, Rhiza, which now covers 1.4m hectares and is on track to meet the target of 4m hectares by 2023. The platform saw significant growth in the Group’s Continental Europe division.
The Business-to-Business Agri-Inputs division which wholesales animal feed materials and fertilisers had a “challenging” year with the unseasonal weather reducing volumes and margins, especially after a strong prior year. John Thompson & Sons, the Belfast animal feed business jointly owned with W&R Barnett, performed satisfactorily.
Origin’s Amenity business was hit hard by the Covid-19 controls in the final four months of the financial year, with the closure of sporting venues and reduced demand for landscaping and local authority services “significantly curtailing demand, volumes, revenues and profits in the period”. The amenity business had to furloughed staff on a rotating basis from late March onwards.
The Group’s other two geographical divisions, Continental Europe and Latin America, both saw smaller falls in revenue and profitability. Continental Europe made an operating profit of €13.2m on revenues of €417m, respective declines of 4.7% and 5.1% on the previous year, while Latin America’s operating profit was down 11.9% to €7.1m on revenues 7.4% lower at €33.1m. The Romania and Ukraine operations are now rebranded as Agrii, at an exceptional cost of €3.6m, wile the Group has divested its 20% share in the Brazilian distributorship Ferrari Zagatto, which it acquired in June 2029.
New Origin chief executive Sean Coyle, who succeeded Tom O’Mahony on July 1st, comments: “FY20 was a challenging year for the Group. Prolonged unseasonal weather conditions, particularly in the UK and Ireland, reduced demand for agronomy services and crop input investment spend. COVID-19 presented further operational challenges. However, thanks to the collective efforts of our people and our contingency actions, we continued to serve our customers, delivering solid profitability and strong operating cash flow.
“With the possibility of Brexit without a trade deal on December 31st 2020 and the ongoing COVID-19 pandemic, FY21 will bring challenges for our business. Consequently, we will continue to implement our prudent risk management approach and capital allocation strategy. With our resilient, integrated crop services business model; scalable and diversified market positions; and strong leadership team in place; I am confident we will successfully overcome these challenges and deliver on the Group’s 2023 strategic and financial growth ambitions.”