Irish agri-services group Origin Enterprises has racked up half-year losses of €7.2m after a collapse in business sales volumes over the autumn-winter period.

Announcing its half-year results on Thursday, Origin said business volumes plunged 26% in its core markets of Ireland and the UK due to a sharp decline in winter crop plantings because of the very heavy rainfall this winter.

Sales for the six-month period to the end of January 2020 fell 14% year on year to €605m, reflecting the reduced demand for agronomy services and crop inputs, such as seeds, fertiliser and sprays, in the autumn-winter planting months.

Sharp decline

The group reported pre-tax losses of €7.2m, which is a sharp decline compared with the pre-tax profit of €5m it made this time last year.

Origin reported an operating loss of €2.8m for the six-month period, which compares with the €9m operating profit it made for the same period last year.

Origin estimates that winter crop plantings in the UK and Ireland are 40%, or 1.1m hectares, behind last year’s levels.

The company said it anticipates that about 55% of this 1.1m hectares will transfer to spring crops, with the remaining 45%, or 495,000ha, likely to be left fallow by farmers this year.

Prolonged rainfall

“It has been a challenging first six months for the group. Operating conditions faced by farmers and growers, principally in the UK, due to intense and prolonged rainfall has led to a 40% year-on-year reduction in the level of autumn and winter crop plantings,” said Origin CEO Tom O’Mahony.

This ... has resulted in lower than expected underlying profitability

“This significantly exceeds the 25% reduction estimated at the time of our first quarter trading update in November 2019 and has resulted in lower than expected underlying profitability and cash generation in our largest division, Ireland and the UK,” he added.

Origin’s net debt position at the half-year point increased to above €264m.

With earnings (EBITDA) likely to be much lower this year, the group finds itself much more highly leveraged than previous years, with its net to earnings ratio suddenly jumping to 3.24 times, which is very close to the maximum leverage position of 3.5 times earnings that Origin has agreed with its lenders under a banking covenant.

Despite reporting such a steep operating loss, Origin will pay a dividend of 3.15c per share to its shareholders, which is in line with last year’s half-year dividend.

Outlook

For its full-year outlook, Origin said it anticipates its full-year operating profit and earnings per share to be significantly lower than expected. Shares in Origin Enterprises have slumped more than 25% since the start of this year and are currently trading at €2.90.