Origin Enterprises plc

Good day, and thank you for standing by. Welcome to the Origin Enterprise PLC 2023 Preliminary Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star, one, and one on your telephone keypad. You will hear an automated message advising your hand is raised. To withdraw your question, please press star, one, and one again. Please be advised that today's conference has been recorded. I would now like to hand the conference over to our speaker today, Sean Coyle. Please go ahead.

Thank you, Nadia. Good morning, everybody, and thank you for joining the Origin Preliminary Results presentation for FY23. I'm joined here this morning by my colleagues, TJ Kelly, our CFO, and Brendan Corker, our Head of Investor Relations. We're delighted to be bringing you a good set of results this morning with operating profit and EPS at the upper end of guidance and a strong cash performance resulting in another year-end net cash position. 2023 included some pockets of weather challenges in the Northern Hemisphere at both key application time and at harvest time. And the market also saw volatile commodity pricing with both grain and fertilizer raw materials moving from high levels midway through the year to significantly lower levels before stabilizing just prior to year end. Despite that, the business delivered a solid operating performance and with a particularly strong cash performance assisted somewhat by these falling prices and lower stock levels due to the business going risk off with falling prices and only replenishing where we saw firm demand. For the last two years, we have returned over €90 million to shareholders via dividends and buybacks, and we have a commitment to increasing dividends and doing a minimum of a further €20 million in buybacks over the next three years. We spent 30 million euros on acquisition activity in the last 12 months to drive a new growth area for the business in nature-based solutions for the amenity environment and ecology segment, which will help us diversify away from the dependence on Irish and UK agriculture, which we saw in FY20 can leave the business vulnerable in a bad weather year. This segment has grown from 7% of profit to 12% of profit in the current year, and even in the absence of new acquisitions, is capable of being 14% to 15% of group profit in FY24. We're delivering on all of the metrics set out at our Capital Markets Day presentation, and thanks to all of our people, I'm confident that we will continue to deliver on the ambitions set out at our 2022 Capital Markets Day. So I'll open with the forward looking safe harbor statement as normal and walk you through the results presentation. The business delivered from a financial operational strategic perspective in a strong way with 90 million euros of operating profit down from last year's unusually large figure but ahead from an operating profit perspective of any group operating profit for fully owned entities at any time in the company's past. We also saw our EPS exceed the upper end of guidance. Free cash flow was strong at $104 million, delivering a very strong free cash flow conversion. And we've been the beneficiary of continuing to hold on to sanctioned payments through the current financial year as we were at last year's financial year end. Return on capital employed is 12.6%, inside our target range of 12 to 15%. And we're announcing today an uplift in dividend for the year of 5%, bringing total dividend for the year to 16.8%. From an operational perspective, the business did extremely well in managing its way through fairly challenging operating trading conditions, as I outlined in the opening statement. We did have recovery in volumes in the Northern Hemisphere following a challenging Q3 weather period where the application period was severely hampered in the UK in particular. And we had strong organic growth in our Latin American business, aided, of course, by favourable currency, which contributed about 13% of the 60% uplift in profit. Post-year end, our Ukrainian business will wind down at the end of September. Unfortunately, trading conditions there have not improved, but as most listeners to this call will know, the business has been at break-even level or loss-making at an operating profit level, and we have lost significant money after interest and tax in that market for a number of years, so we've made the decision that we will close the business because we don't see operating conditions improving in that jurisdiction for the foreseeable future. From a strategic perspective, the amenity environment and ecology business is expanding, driven principally by acquisition in the period, with the acquisition of Keystone, Agrigem, British Hardwood Trees, and Neo Environmental, and post-year end, we added another business, Suregreen, to the overall constituents of that segment of the business. Brendan and the team continue to do fantastic work on progressing our ESG strategy. We have delivered a carbon transition plan to 2032, which is the foundation of the science-based targets, which have been submitted to SBTI for approval, and we hope to get back in the coming weeks. And we're also continuing to work on developing our nurturing growth sustainability strategy and environmental policy. And the business continues to invest in organic growth as well. So we have invested in production expansion for our Folic business in Poland. We have a number of expansion projects underway to expand the Brazilian operation. And we're working on expanding some of the production capabilities of our Romanian business as well with coated fertilizer projects and a micropack project underway there. We're in the middle of an ERP rollout amongst our Ireland and UK businesses and our Goulding's business is the most recent to have gone live and we expect to put our agribusiness live before the end of this calendar year and a number of our remaining businesses over the course of 2024, calendar 2024. And we are fast-tracking our biosolutions business with the introduction of a new FirstAg biotech business alongside our Fort Green business in Brazil. So to dive into some of the individual segments in a little bit more detail, the Ireland and UK business had a reduction in profit from 94.5 million last year to just under 58 million euros this year. But the business coped well with the challenging weather conditions and a more normalized year of trading, particularly the raw material price volatility, which we experienced over the major part of the year. We continue to see innovations coming into our pipeline from a nutrition perspective, from a biosolutions perspective, where we're working on a green list of products. and our digital portfolio as well. And the business was recently awarded the Enterprise Ireland Innovation Award for our Grassmax tool here in the Irish marketplace. We delivered strong growth within our amenity, environment and ecology division, and we've broadened our service and product capability through acquisition in the period. So we're happy with the performance of the Ireland and UK business. Within that particular segment of amenity, environment and ecology, you can see there that revenue growth from the time that we essentially commenced expansion into this space in 2022 and beyond has accelerated from a historical level of 50 to 60 million euros. And the business continues to see growth both in the nature-based solutions and landscaping area as well as into the more advice and services led area from the acquisition of Keystone and Neo Environmental. So we're happy that that business can continue to grow. It is delivering an operating margin in excess of our agri businesses and is typically a capital light business. So a low level of working capital and a low level of assets dedicated to that particular business. So return on capital employed should be very strong in this particular area. In terms of our continental European business, we did see a jump in profitability, and in particular, excluded from the 15.8 million number, which you can see in orange on this page, we also had a strong performance in our grain trading business, which contributed a further 1.5 million euros of profitability in FY23. The business continues to see higher return on capital employed metrics over the course of the last five and six years as we have reduced working capital dedicated to this business over time and continue to maintain growth and profitability. You will remember that some of the earlier years in this period contained a profitable Ukraine business in 2018 and also our Pilar business, our Belgian fertilizer business, which was disposed of in 2021. So the business continues to see growth. We're happy with the performance of the business, but unfortunately, we have had to close our Ukrainian business and that will close in the coming days. We think that that will have minimal impact on the overall regional operating profit reported in FY24. Our Latin American business saw continued growth. And again, from the time of acquisition in 2019, profits were suppressed somewhat with unfavorable currency movements over the course of 2020 and 2021, which saw the reduction in the reported Euro number, even though our Brazilian Rei number had been showing increases at that time. But since then, the improvement in currency has allowed us to see improvement in Euro reported number to 9.7 million last year and a 15.7 million figure in 2023. So we're extremely happy with the performance of this business. We continue to dedicate capital to building out capacity and we have expanded our distribution facilities there and are in the course of expanding our production capacity and capability which should allow us to meet growing demand over the next three to four years. We've also launched the first ag biotech brand at the tail end of FY23. Sales are negligible in this period, but we are seeing strong early sales performance in FY24. And we expect to see and have completed the 35% put call option, which buys out the remaining, 35% from the founders of the Fort Green business, and that was executed post-year end. You will remember that we have been, because that put call option was always going to be exercised, reporting the Fort Green profitability on a fully consolidated basis since we acquired the entity. So there's no uplift in profit from the acquisition of that 35%. we've always reported that profitability on a fully consolidated basis.

So I'll hand over to TJ who will talk you through the financial performance.

Thanks, Sean. So just to touch off of some of the highlights on financial performance, revenue growth overall at 5.5% on an underlying basis breaks out into pricing, growth of just under 12% and volumes decline of about 6%. And that's very much a story of the first and second half, whereby in the first half, we had very strong pricing inflation of circa 40%. And then as markets started to retreat, we saw a pricing deflation impact in the second half of about 5% or so. that revenue performance in a full year, as I say, very much a story of inflation in a key feature of the first half and then deflation impacting in the second half. Adjusted EPS then, as Sean said, we're ahead of guidance, which was 50 to 53 cents. We're very pleased with the EPS performance and driven by what was a good close out to the year end, despite some challenging weather conditions. And while our operating profit is behind FY22, it does represent an historically high EBIT delivery for the group. Looking then at free cash flow, free cash flow was positively impacted again by a strong working capital inflow in the year. That working capital performance was impacted by those lower primarily FERT and feed raw material pricing feeding through, so the unwind of those inflated levels of working capital really benefiting us in the second half. And we also had the favorable timing impact of purchases and sales off-takes during that second half as we tightly managed our stock positions. Only buying for demand existed. And the delay really of buying behavior in the second half fed through to that working capital benefit as well. as we bought later on the back of later demand and that had a positive impact in terms of collecting cash, but not paying suppliers until typically post the year end. We also had the continued benefit of withheld payments to sanctioned parties. And for FY24, we do expect some working capital outflow as volumes we'd anticipate would return to more normalised levels during FY24. and we're also likely to see the impact, at least of some of the sanctioned payments being made through FY24. And that free cash flow then in turn translated again into a very strong net cash position at the year end, where we were positive in terms of net cash at just over 53 million, again, consistent with last year where we ended in a cash positive position of just over 43 million euro. In terms of capital deployment then, in addition to the dividends and buyback that we completed. We invested, again, as Sean mentioned, across the M&A space in the businesses outlined, and we had a €28 million in strategic capex, which I will come back to a little bit later. Just to give an overview, then, of our progress against the Capital Markets Day target ambition for the five-year period FY22 to FY26. As you can see there, against the operating profit target of €415 million over that five-year period. Two years in, we were just over 50% delivered from an operating profit perspective. And from a free cash flow perspective, again, we had targeted cumulative free cash flow of €325 million for that five-year period. And two years into the plan, we are 66% delivered. You will recall, of course, that in that five-year plan we did anticipated and catered for a bad weather year event. Looking again at free cash flow, very strong metrics in terms of overall absolute free cash flow and free cash flow percentage and balance sheet in terms of financing metrics, again, very strong, primarily as a result of the net cash position that we finished the year end in. From a facilities perspective, again, I'd say well-financed, our facilities, the bulk of our facilities run out through to 2026. Looking then at capital allocation in just a little more detail, our M&A spend of €30 million is across AgriGem, Neo Environmental, Keystone, British Hardwood Trees, and we also spent €28 million on strategic CapEx. The key drivers of that strategic CapEx investment were continued investment in D365 or ERP rollout across the Ireland and UK businesses of approximately €11 million, other digital investments of about €3 million, and then we continued to progress the development of the Folic plant in Poland, CRF and physiology nutrition capacity in Brazil, and enhancing our investments across our feed businesses are the other key part of that investment. From a shareholder return perspective, then, we're proposing a final dividend of 13.65 cents, which will bring the full FY23 dividend to 16.8 cents, an increase of 5%, and that represents a payout ratio of 36%, which is broadly in line with the target payout ratio that we set at the capital market today of 35%. And again, our goal and target is to be a progressive dividend player pair, and pleased to be able to do that in the current year. Read the share buybacks, and we've completed €60 million overall of our targeted €80 million to complete by FY26, so that would imply a €20 million buyback to be done over the course of the next year. the next three years or so. So with that, I'll hand it back to Sean.

Thanks, TJ. In terms of our strategic progression, you can see there that the macro growth drivers for the business, from our perspective, are sustainable agronomy, the responsiveness of the food supply chain globally, and also the emerging nature economy in terms of driving the sustainable land use team, which is at the heart of our strategic thinking. And how we win in that is transitioning our own product and services portfolio towards a better set of products, which are more geared towards the environmental transitions that Europe in particular is going to have to take, continuing to develop and build market leading business models across our portfolio of businesses, and also accelerating our participation in the environmental and ecological markets in the provision of nature-based solutions. So we think we've done reasonably well in this regard over the course of FY23, and some of the highlights that we'd want to call out here are continued investment in digital agronomy, including the grass measurement capability and nutrient management planning as part of that, The development of the first ag biotech business is part of our product portfolio in Brazil. We're continuing to work on enhancing the nitrogen use efficiency of our fertilizers through continued refinement of product and product development. We're expanding our foliar fertilizer capability in Poland. and we're continuing to develop the landscaping and forestry product offering within our amenity businesses. For 2024, we are working on additional research which will allow the nitrogen use efficiency of crops improved by 20% over the course of the year. AGRI have an existing maximizing arable performance benchmarking project across part of its portfolio and what we're looking to do is try and digitize that and get it into our digital tool. The product and services portfolio will also see improvement in our micropack production facilities in Timisoara in Romania and the rollout of fertilizer coating facilities in our Romanian business. We're also investing in Latin American production capacity to continue to drive the growth there and allow growth for another three or four years. and developing natural inhibitors for our products to allow for slow release of product on field. Our M&A pipeline is reasonably active. There's certainly no transactions close to completion at this point in time, but we've got very active dialogue with a wide range of businesses across UK, Ireland, North America, and also in Western Europe. We continue to see ourselves expanding the number of distribution outlets, particularly in our environment and ecology market. And we also see ourselves enhancing our online capabilities. So as part of the go-live of some of our businesses on D365, we'll also be rolling out online portals as part of that particular rollout. At our capital markets day in 2022, we set out objectives for the business in this slide exactly and I'm pleased to say we are ticking the box in that regard in terms of delivering on both strengthening the foundations of the business but also investing for growth. So we continue to invest in our people and try and attract the best talent to the organization. We're continuing to improve our use of technology through our digital tools and online capability. The business has definitely maintain that working capital discipline that we've introduced over the last few years, and we continue to see product innovation and change in product mix to enhance margin in our existing businesses to deliver organic growth. In terms of growth of the businesses from, I suppose, an inorganic perspective, we have seen an ecology services acquisition, we've seen bolt-ons in our landscaping business, We've broadened our amenity service offering by continuing to invest in adjacent businesses, and we're seeing growth in our biologicals business through the investment in FirstAg Biotech, but also development of new biological products across the agri products and our OAS brands.

Brendan, you might just walk us through the sustainability slide.

Thank you, Sean. At the core of our group, I suppose we're very cognizant of the fact that we have a key role to play in supporting our customers in navigating the evolving regulatory environment and also helping them and supporting them in their transition towards the net zero environment. So we've always placed, I suppose, near market research at the center of our offering to customers, and this has enabled us to develop novel products and novel solutions to help our customers on the ground. So over the past decade, we have come out with new products such as our prescription fertilizer offering, as well as using productivity as the center and core of what we're doing to deliver for our customers. Within the last two years, we have started to shift our product offering to focus more on soil health. So we brought out our soil resilience strategy, as well as developing carbon calculators for our fertilizer products. To guide us over the coming years and to support our carbon transition plan, we have introduced a number of KPIs for the group. One of those at the centre is improving nitrogen use efficiency by 20%. That will encompass an all-encompassing product offering between the services such as digital and looking at nutrient management plans, as well as the product offering that we deliver in the fertiliser business. As Sean has alluded to earlier, we're also looking at the biologicals area, and we have a KPI to fast-track biologicals across the group. And this will be supported with the launch of the first ag biotech business in Brazil. Notwithstanding what we're doing for our customers, we're also looking internally at our own business operations. And over the past 12 months, we have had a very strong focus on what Origin can do within its own operations to reduce its emissions and footprint. We have created a carbon transition plan and also developed KPIs that we have submitted to the science-based target to reduce our emissions across scope one, scope two, and the full supply chain emissions in the group. This has been recognized and our efforts have been recognized through our ratings, and you have seen rating improvements across CDP, MSCI, and Sustainalytics over the past 12 months as well. TJ, I'll hand over to you. Thanks, Brendan.

so in summary then um overall you know we say we're very pleased with it with the performance uh in fy 23 in the context of what were volatile markets particularly as we got into the second half uh we continue to deliver on our m a strategy very much focused on building out our second core uh in the area of immunity environmental and ecology uh sub-segment and i'm pleased with the M&A activity that has been delivered through FY23. As Brendan outlined, sustainability is very much at the core of our customer offering and that's equally supported by commitment to best practice within our own operations within the organisation. Cash generation again has been a highlight and a feature of FY23 and indeed the previous year also and that's very much a continued focus for us in the businesses to drive that EBIT to free cash flow conversion as we look out over 24. Looking then at capital allocation, we continue to pursue a disciplined approach to capital allocation to drive shareholder returns. And indeed, our ultimate objective is to drive those shareholder returns through a combination of margin accretive acquisitions and continuing to mine and improve the margin profile across the business and doing that within the hurdle rates of returning capital implied of 12 to 15%. So pleased that we're delivering that on an overall portfolio basis through FY23. Dividends and return to shareholders continue to be an important part of our focus and again pleased with the increase in dividend of 5% for FY23 and also our ability to be able to complete a share buyback to FY23 again in the order of €20 million. So our focus very much for 24 is on driving that sustainable growth and pleased with the fact that we're on track to deliver our ambitions that we set out in our overall capital market today in May of 2022. So with that, we'll hand it over for Q&A, please. Thanks, Dariusz.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by. We will compile the Q&A roster. This will take a few moments.

Just give us a moment. And now we're going to take our first question.

And the question comes from the line of Jason Mullins from Goodbody. Your line is open. Please ask the question.

Hi, good morning. Thanks for the questions. If you don't mind, I've just got three that I want to touch on. Firstly, on the amenity business, it's very helpful with the additional detail that you've given us there. Can you give us a sense for the organic growth that you're seeing in that business at the moment and with some of the acquisitions that you've done over the past while, have you seen any revenue synergies across some of your platforms? Second question, just looking ahead to the planting season, given where some crop prices are, but also some of the input costs as well, any color on farm sentiment at the moment and how do you see that impacting the planting season in the coming months, particularly in the UK. And then final question, really on LATAM, in terms of the first ag biotech business that you mentioned, how does that product range differentiate between some of the existing businesses and offerings that you have? How do you see that opportunity going forward in ag biotech? Thank you.

Hi, Jason.

I'll take the amenity question first. So across the amenity businesses, we had a little bit of a tale of two halves. So within our amenity portfolio, we obviously have some fertilizer businesses, including our own manufacturing facility within the PB Kent business, which is reliant on natural gas as the principal source of production for the speciality fertilizer that we're making there. And that business saw a pretty significant dip in profitability in 2023. So it was well back because of natural gas prices through the year. So overall, our amenity businesses, apart from that, saw kind of mid single digit growth. we're not really seeing revenue synergies yet from the acquisitions that we've bolted on but that that's an ongoing piece of work to try and pull together commercial opportunities um and we we do see opportunity um across the various businesses we've acquired you'll have to remember that really they've only be coming in piecemeal over the last kind of six to nine months and uh are not all fully consolidated yet and fully kind of up and running yet in terms of commercial interaction with other businesses. So there is opportunity there. There's a piece of work ongoing to try and drive some revenue synergies, procurement synergies, I think, because we have some common suppliers across these businesses and with the opportunity as well in terms of broadening of product range in certain businesses that doesn't currently exist, but where we provide alternative products in another part of the group. So, for example, our British hardwood trees range could certainly be seen in our green tech business or be seen in the shore green business, and we could supply those through those two distribution outlets. Similarly, our sure green business has a reasonably restricted product range when you compare it to the green tech business. But equally, we would see ourselves being able to expand more of the green tech range of product, including soils and substrates for roof gardens into the south of the country where currently we don't have distribution locations. there will be opportunities and they will come to fruition over the coming six to 12 months in that space. Maybe TJ, I'll let you answer the next one.

Yeah, so good morning, Jason. In terms of planting generally in farm sentiment, I suppose maybe take that Northern Hemisphere, Southern Hemisphere, Northern Hemisphere-wise, I suppose harvests generally have been the later, driven by weather, but harvests are largely complete at this stage and yields are probably so-so, probably back slightly. But planting conditions generally are good. UK was anticipating a need for some warmer weather, but generally the expectation is that winter wheat, for example, will be back up around the 1.8 million hectares or so for 2024. But we'll update on that in our Q1. announcement. Farm sentiment is, we'd say generally cautious. Again, as you'll be aware, soft commodities, both dairy, the grains and oils on the global markets have generally been soft. We'd look at, for example, feed wheat in the UK at kind of 200 pounds per £200 per tonne has been a key benchmark, below which farmer sentiment tends to get a little bit softer. It's been in around the £180, £190 per tonne over the last number of weeks. Input costs, I suppose, to counterbalance have been softening, albeit in the recent number of weeks, fertiliser has been firming again, nowhere near as significantly as last year. But I suppose that's creating an overall sense of cautiousness. Buying decisions across the trade, right down to farm level, I suppose, have been characterized by being later generally. So a lack of commitment to going long on stock, both in the trade and at farm level, I suppose, has been a feature. So caution is probably the key word, I would say, in terms of across our CE, UK and Irish businesses in terms of buying behaviours. From a LATAM for green perspective, it's our busy season right now, and generally farm sentiment is good. While the sire price in particular has been a little bit softer, it's still high relative to history. Yields have generally been good, so generally say farm sentiment in our Brazil business is in pretty good shape. So yeah, I would say overall Northern Hemisphere cautious, Brazil generally positive, but planting conditions obviously which are important for us from a Northern Hemisphere perspective are generally good and that's obviously a critical piece for us in terms of a base for full year performance in FY24.

And I think your third question was biological products, is that right Jason?

Yeah, the first ag biotech, just a bit more color on that.

Yeah, so, I mean, we've launched there with, I suppose, eight products initially across kind of four sub-brands within the Brazilian operation. We're not expecting a very significant sales result there over the course of the next 12 months. It will be a slow burn. I would imagine that at most we'll be looking at about $10 million worth of sales over a 12-month period, maybe a little bit more than that. But the business is up and running. It needs to be in a separate physical location because the regulatory environment for biological products is different to the core fertilizer product range and physiological nutrition range that we have within the Fort Greene business. So we've got a separate premises and a very strong academic team there of kind of postdoctoral researchers involved in the development of products. But we're also taking in products from other industries sources of IP and marketing them on behalf of other companies as well. So it's a combination of using our existing sales infrastructure and our broader sales infrastructure to market other people's innovation as well as developing our own product range.

That's helpful. Thank you very much.

Thank you.

Now we're going to take our next question. Just give us a moment. And the next question comes to Lan of Castle Caney from David.

Your line is open. Please ask your question.

Good morning, all, and thanks for taking my questions. Firstly, to TJ, just on working capital, can you talk us through the moving parts as you see it for FY24 and maybe build out that into your net debt assumptions as well for the year ahead? The second question just relates to your green list of products, Sean. Obviously, you're making good progress on transitioning the portfolio. Would it be possible to comment on what you're seeing from the supply base, the key chem manufacturers in terms of crop protection and seed in terms of just the progress they're making as well around these key green initiatives? And my final question then is on M&A as you look into the years ahead. Should we expect a similar type of profile in terms of the assets you've acquired and companies you've acquired more recently within the ecology, horticultural segments, or could there be something more meaningful? Thank you.

Good morning.

Thanks, Gahal. Let me deal with the first question on working capital first. As I said, we have very strong inflow in working capital in FY23. Pricing and timing were the two key dynamics of that. It would be somewhat challenging to parse out between what's pricing and timing specifically, just given the nature of working capital. Maybe if I pitch it forward to FY24, what I would say is that underlying, we will see a working capital outflow, an anticipated working capital outflow, excluding the impact of sanctions with the sanctions payments, which I'll come back to, which is a natural really rebuild of inventory. And it's a correction of the timing benefit that we had in FY23 just passed that I mentioned. rough order of magnitude, the nature of that timing reversal could be in the order of 40 to 50 million euro. The other impact that we will see is sanctions, where there is a potential or likelihood that some of the sanctioned monies that we are withholding will outflow in FY24. That's work in progress, as we have mentioned before, and we're working very closely with the the relevant central banks across the European jurisdictions where this is impacting. But for forecasting purposes, we're anticipating an outflow related to those sanctioned withheld payments. The other key outflow that has already been encouraged in FY24 is the put call, exercising of the put call option in Fort Greene, which was 32 million euro. That liability we held in the balance sheet at the end of July. subsequently been paid. So if you take the round sums of an underlying working capital outflow in that order of 40 to 50 million euro, the impact of the Fort Greene deferred consideration payment, and then we have the usual interest tax, capital expenditure, and this is pre any M&A or other capital allocation. I think it's reasonable to assume at this point, and it is obviously very early in the year, but it's reasonable to assume that net debt to EBITDA would likely be in excess of one times EBITDA, possibly up to one and a half times EBITDA at the end of FY24, just to give you a rough order of magnitude at this point. I mean, we'll obviously calibrate that further as we get into the year, but just the broad buckets of likely movement in working capital in particular, that's how we would see it.

Okay.

In terms of green list of products, there's a number of areas, I suppose, active there. As you know, a lot of the crop protection R&D manufacturers, the larger ones, are buying up biological businesses globally and trying to consolidate them into their businesses in order to develop a more biological range or a range further away from synthetic chemistry. So there's that piece of work ongoing as part of our supplier base. In addition to that, we've got lots and lots of small operators who are developing bio products. And we would have seen about 220, 240 of those over the course of the last 12 months. And some of those will go through the R&D process. We are currently investing in a new temperature controlled environment, which will sit in Throats Farm, which will allow us to control temperature, humidity, light heat, et cetera, and run accelerated tests on the viability of biological products and products which are making claims in relation to their efficacy. And that will allow us to narrow down what we bring through to the sale process and stand over some of the claims that some of these smaller companies who don't have as big an R&D arm are making claims in relation to. So we've got to do our own testing in relation to that efficacy. Separate to that, then on the fertilizer side of the house, there's a couple of areas where we're examining change. And most of those involve pragmatic back coating of products to delay emission into the soil, to allow the nitrates go into the soil on a slower basis and not, I suppose, escape into the atmosphere. That's the principal area, the addition of micronutrients and different blends of products, which we've been doing over the last few years, which essentially derive the same yield from a lower nitrogen content product. And then in addition to that, newer areas are the development of things like green ammonia, which is available in the European market now, but probably at price levels which are not competitive with standard fertilizers. So we can get our hands on green ammonia, but they're not really competitive in terms of price point relative to other technologies, and therefore farmers are not really interested in the product at this point. And we're also dealing with other players who are producing digestate from anaerobic digesters or food production systems, which essentially produces a low energy additive, which could be added into a fertilizer blend, but certainly doesn't have the right component of nitrogen to promote significant growth. so we may look at that being part of a fertilizer blend but not a significant part of a fertilizer blend it can be a dusty product and difficult to handle as part of the overall fertilizer mix but these things are continuing to improve over time so we're kind of adding those types of products including green ammonia to our um i suppose horizon scanning in terms of what's available out there for the for future uh product use and then just to come back to the uh the question around profile of assets that we might acquire um yeah i would say that it's it's typically an unconsolidated market uh call so there are um I would say a handful of private equity owned bigger players in the consulting space that may become available over the course of the next while, but whether we're competitive in that space, given our own EV EBITDA multiple, and we've got to give consideration to Are we better off buying our own share or are we better off paying over the odds in terms of EBITDA multiples for other players that come to market? Certainly the smaller players that are available are available at reasonable multiples, as you'll have seen from the acquisitions that we've made in the last 12 months. So we can continue to bolt on businesses at reasonable EBITDA multiples. There are bigger players out there that we could accelerate a transition into this segment should we so wish, but they may just be available at multiples which are not in keeping with what we'd be prepared to pay or look out of line with our own EBITDA multiple.

Great. Let's go, Collar. Thank you.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. Now we're going to take our next question. And the question comes from Kevin Fogarty from Nubis Securities. Your line is open. Please ask your question.

Hi, morning all. Thanks for the presentation and the opportunity. If I could have three questions, please. So the first one is just really on CapEx. Clearly you've talked about strategic CapEx going forward, LATAM obviously in Poland in particular. I just wondered if you could sort of quantify what we should be thinking about in terms of the sort of quantum of strategic CapEx over the next couple of years and just particularly what does that do to LATAM's capacity or capability from here. So that's sort of question number one. Number two on amenities, so thanks for the additional color you've provided today. Obviously, you kind of stand out here is sort of the margin structure looks very different compared to the rest of the group. I just sort of wondered, you know, given the comments you've made about the performance of that business being a bit compressed, does 2023 sort of understate the sort of margin potential of that business and perhaps, you know, just help us understand the kind of nature of the relationships and contracts you've got there just compared to other parts of the group. And just finally, in terms of the new product development, I just wondered, is there any element of sort of customer pull here that's driving that new product development or is it, you know, you're identifying needs that are unfulfilled by others at the moment? or just a little bit more color on that one would be great.

Maybe I'll let TJ handle the CAPEX question, and I'll come back to the immunity question. Sure.

Good morning, Kevin. Yeah, so in terms of CAPEX for next year, we have a few, I suppose, reasonably-scaled projects that will be happening. In the rough order of magnitude, we're looking at CapEx next year of around €30 million or so. Again, what we will see is another relatively large spend on our ERP rollout, so in the order of €10 million or so of investment in our D365 rollout across the businesses next year. And then we've got pots of 3.5 to 5 million euro each across remaining investment in our Folic plants. That would be closer to about 3 million euro or so, given that we've invested some in that Folic plant already this year. That will increase capacity in Folic and centralise the the manufacturer of Folicin or Alexandrov facility in Poland. We are also investing about €4 million in a new bottling facility in Timisoara in our Romanian business. And then across the CRF and physiology nutrition business in Brazil, we'll be investing to grow effectively our CRF capacity from about 45,000 tons today up to between 65 to 70,000 tons capacity, which we see would give us growth for the next couple or three years or so in the CRF business. Again, what for the magnitude of spend and investment there will be between CRF and the physiology and nutrition capacity investments in the order of, you know, again, 4 to 5 million euro, we would say next year. So they're the big ticket items that are in train for CapEx spend for FY24. Great.

That's helpful. Thank you. Kevin, just on the amenity businesses, the PB Kent profitability And fall in profit was roughly a million euros, maybe slightly more than a million euros. So the absolute number is probably understated compared to a normal year because of the higher gas prices and slightly lower volume in PB Kent as a result. So yes, both the absolute margin and the... percentage margin are understated as a result. I think some of the businesses that we've acquired are more seasonal and more profitable in the winter. Certainly British hardwood trees, since we've acquired it, has been loss making in this period because it doesn't make money in the summer. It makes money in the winter period when all of that tree planting activity happens and it's carrying an overhead obviously through the summer period, but it's only in there for a few months. So what I would expect to see is growth in sales, growth in absolute level of profitability from the newly acquired businesses when they are all in there on a full 12-month basis. and we expect to see both an uplifting percentage margin in this division and also the absolute level of profitability in this business over the course of the next 12 months as the businesses are all included on a full 12-month basis.

Great. That's helpful. Thanks a lot. Thank you. Did we miss one of your three questions? Yeah, this is the final one. Just in terms of product development, you know, obviously you've talked a lot about that today, and I just wondered, you know, is there an element of sort of customer pull here? You know, clearly, you know, there's a sort of transition in terms of the space and where it's going to, you know, kind of more biologicals, et cetera. I just wondered, you know, are you seeing a sort of customer pull here, or is it you sort of identifying... an unmet need, for example, that isn't being fulfilled by others, just what the thinking is around that.

Yeah, I think there is greater interest in the possibilities of bioproducts and biocontrols than there has been in the past. It does vary by market. It's certainly, you know, we've got a lot of different areas where biological products will work alongside synthetic chemistry to increase the efficacy of the synthetic crop protection products that are being used by farmers. So they will encourage the roots to grow deeper or go deeper. They will add to the efficacy of a standard product and perhaps allow a lower level of CP product to be applied. So we're getting things like wetters or things like adjuvants and foliar fertilizers, which can be made from natural products, but which assist the application of synthetic chemistry and allow a lower dose rate to be applied. So there's a combination of factors. The world of biological products or bioproducts is very complex. In some cases, it's not complex. And in other cases, it's very heavily regulated depending on the product claims. So it's still overall, though, Kevin, represents a very small proportion of farmer spend. You know, it is, you know, at an overall level, still represents a low proportion of our sales and a low value in terms of farmer spend.

Yeah, sure. OK, understood. But that's useful, Colour. Thanks a lot. Thank you.

Thank you. Dear speakers, there are no further questions at this time. I would now like to hand the conference over to our speaker, Sean Coyle, for any closing remarks.

Okay, thank you very much for joining us this morning.

Hopefully, we will see some of you on the roadshows. We're in London, certainly, and in the U.S. over the course of the next week and a half. So, hopefully, we'll We'll see you then and catch you either in person or virtually over the course of the next week. So thank you for joining the call this morning. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.