A trading update from Origin Enterprises, the Dublin-based parent of the Agrii business in the UK, reports that the late spring has had a significant impact on agronomy service revenues and crop protection product volumes, which have fallen by around 20% year-on- year.
The second half is traditionally the major revenue period for the business. While there will be an increase in activity over the final quarter, it does not expect the Q3 shortfall to be fully recovered due to the effect of “the later season on crop potential, against the backdrop of generally weaker sentiment on farm”.
Origin has posted Q3 2016 Group revenues of €555.5m, 1% down on the €560.9m from Q3 2015. But 15% of the figure is from acquisitions in Eastern Europe, with like-for-like trading 12.2% lower after currency effects.
Similarly, at the nine month stage, revenues are €1.06bn, a 2.7% fall on the previous €1.09bn, with a 10.8% like-for-like fall.
Origin blames an unseasonably wet first half followed by higher average and sustained rainfall across the main crop growing regions in Q3 leading to heavily saturated soils and slower crop development, with field applications and spring planting significantly curtailed.
Revenues for its Polish operations fell by 25%, with prolonged frosts there, causing the loss of some 1.2 million hectares of winter wheat and oilseed rape, some 20% of the total winter cropping area. It also delayed spring plantings. But the Group’s agronomy businesses in Romania and the Ukraine have performed above expectations.
Origin’s Agri-Inputs wholesaling operation inIreland and the UK expects higher fertiliser demand in Ireland, driven by higher livestock numbers and forage needs, to offset a fall in UK volumes with “reduced application of speciality and bespoke fertiliser as primary producers adopt a targeted approach to nutrition investment this year in light of the current pressures on farm incomes”.
Feed Ingredient volumes in Q3 rose as the unsettled weather delayed grass growth and led to a longer winter housing requirement, with annual volumes predicted to be marginally higher year on year. John Thompson & Sons, the Belfast-based largest single site multi-species animal feed mill in the EU in which Origin is a 50% shareholder, “delivered a satisfactory result against lower Q3 volumes”.
Looking ahead to Q4, the Group notes “an encouraging start, although confidence at farm level remains subdued reflecting the current challenging backdrop to primary output markets which is expected to make for a highly competitive trading environment in the fourth quarter”.