Origin stock secures ‘outperform’ rating as revenues rise by 7%

Agri-services group Origin Enterprises has seen its revenues rise 7% for the year to date, having reached the nine-month mark to Apr 30 in its fiscal year.

Group revenue was €959m for the nine months, up by 2% compared with €983.5m in the same period last year. During the third quarter, revenues increased by 22% to €451.6m.

These figures relate to agri-services. The consumer foods business is reported as an associated investment, following the completion of Origin’s transaction with Valeo Foods in Nov 2010.

Analysts have responded favourably to the performance, noting the rise is in line with the company’s previous projections this year. Origin is holding to its projection of diluted earnings of 44c per share for 2012.

Davy Stockbrokers is giving Origin’s stock an “outperform” rating for the fourth quarter, predicting a solid closing quarter.

Davy notes 85% of the group’s profits now come in the second half of the year, following structural changes in operations in recent years. Its positive projections are also based upon Origin having performed strongly in Q3, despite the broader market for fertiliser experiencing a dip in demand.

Davy’s analysts stated: “Underlying volume-led revenue growth of 8% in Q3 is a good performance given lower fertiliser demand. Crop conditions in the UK will likely require more protective applications than usual this year, so trading until year-end should be strong in agri-services and this will offset weakness in associates and the joint venture.

“The restructuring of Origin around agri-services is more and more vindicated by its continuing performance. We maintain our ‘outperform’ rating.”

Origin highlighted its on-farm agronomy services in the UK, which delivered an excellent performance in the period, reflecting positive demand-led growth that is underpinned by higher autumn 2011 plantings. Favourable farming returns combined with excellent growing conditions and crop development supported increased full service crop management applications.

In Poland, the business also performed strongly in the quarter against the backdrop of sizeable winter crop losses due to the impact of a short but severe winter. On-farm activity during the period has been significant, reflecting an increased level of spring plantings offsetting winter crop production losses.

The group also said it had seen positive progress in the period relating to the integration of the group’s UK agronomy services platform following the announcement in January to combine Masstock and UAP under a new identity called Agrii.

Agrii is operating under a simplified and decentralised organisational structure focused on building strong regional leadership capabilities and driving an integrated approach to customer service.

In terms of the Irish market, Origin stated that business-to-business agri-inputs performed well in its third quarter.

The company stated: “This performance reflected increased fertiliser deliveries in both Ireland and the United Kingdom during a more concentrated offtake period. This followed a seasonally quiet first half of the year when primary producers delayed their purchasing commitments until closer to the main application period.”


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