Better 2017 season and prices lift Origin results

Origin Enterprises, the Dublin-based agronomy services group operating in the UK, Ireland and Central Europe, has reported a 4% increase in profitability on slightly higher revenues from its latest full year of trading.

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The Group made an operating profit of €74.38 million on sales of €1.53 billion in the year ended July 31st 2017, compared to €72.88m and €1.52bn in the previous year.

In Ireland and the UK, agronomy services activities under the Agrii banner contributed an operating profit of €53.4m on revenues of €0.96bn from the €52.7m and €1.03bn in the year before. The contribution from associate businesses and a joint venture fell 21.4% to €4.4m.

 Agrii delivered a satisfactory performance after the “particularly difficult” trading conditions experienced in 2016.  Improved crop prices following sterling’s depreciation, while better dairy incomes and lower than expected input cost inflation lifted farmer demand for agronomy services and crop inputs. The business saw higher product volumes and improved margins across all its service and input categories. The UK operation was restructured during the period, incurring an €11m rationalisation cost.

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Agrii is a key player in the transfer of crop technology to farm- in March this year Origin acquired the digital agricultural services business Resterra.  It is still integrating the operation, which is already contributing a satisfactory financial performance. The Group is focusing on developing new agronomy applications and the launch of precision farming services across its European footprint.

Fertiliser volumes were up in the period after strong early season demand set the tone for the year, with farmers more confident on crop returns and having greater certainty over fertiliser pricing. Speciality plant nutrition applications is a growing part of the company’s portfolio, based on the need for “balanced nutrition planning to restore soil health and optimise crop productivity” in arable and forage crops.

Origin’s acquisition of the Bunn Fertiliser business from Koch Industries was completed in August after the financial year end. The UK competition authority required the divestment of a fertiliser terminal in Montrose, Scotland, subsequently bought by the Wynnstay Group.

The Business-to-Business Agri-Inputs division handling feed materials and fertilisers saw operating profit growth in line with higher demand for fertilisers and increased volumes of feed materials with better milk prices and the end of EU milk quotas in April 2016. The Amenity division delivered a very satisfactory performance on volume growth. In July this year the group acquired Linemark, the Lancashire-based specialist in sports and amenity pitch marking.

John Thompson & Sons, Northern Ireland’s largest feed manufacturer in which Origin has a 50% stake, performed satisfactorily.

Origin now reports its European activities, comprising agronomy services across Poland, Romania and the Ukraine, under a Continental Europe division. This made an operating profit of €16.6m on sales of €397.3m, respective increases of 14% and 22% on the €14.9m and €320.3m of the previous year.

Origin has invested in a new €6m seed processing and input formulation facility in Poland which is due to come on-stream early in 2018.

“Origin has delivered a solid financial result in 2017,” notes chief executive Tom O’Mahony. “While market conditions were highly competitive, a combination of sustained volume growth and higher margins underpinned a strong underlying business performance which more than offset the adverse currency translation impact of sterling depreciation.

“We continue to prioritise growth opportunity in Agri-Services while also focusing on operational and commercial effectiveness. The acquisition development and innovation investments made during the year will broaden the Group’s service offer and capabilities in systemised crop technology transfer.”

Mr O’Mahony says it is still too early to assess the longer term implications of Brexit. While recognising the uncertainty over the final outcomes of the Brexit negotiations on UK domestic agricultural policy, regulation and future trading relationship between the UK and the EU. “The Group is planning a variety of scenarios which will be updated as Brexit outcomes become clearer. We continue to progress a number of strategic initiatives aimed at providing long term sustainable benefits to the Group and are confident that our business model is well placed to address the challenges and opportunities that may arise.”

The Group expects a “stable operating environment” for farmers and growers in 2018, but with “farm sentiment expected to remain cautious reflecting general volatility in output markets”.