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.