Origin Enterprises plc

Good morning, ladies and gentlemen, and welcome to the Origin Enterprises PLC Preliminary Results Call 2024. Just a reminder that this call is being webcast live on the internet and the presentation is available to view on the Origin website. I'll now pass over to Sean Coyle, CEO of Origin Enterprises PLC. Please go ahead, sir.

Thank you, Sonia. Good morning, everybody, and welcome to the full year results call for 2024 from Origin Enterprises. I'm joined this morning by my colleagues, Colm Purcell, our new CFO, TJ Kelly, the divisional managing director of our living landscapes business, and Brendan Corbin, our head of investor relations. The Origin numbers this year have come in at the upper end of expectations, really driven by a strong performance in the final quarter with late season applications in the business performing well and the overall business coming in with a very small reduction in profit year on year considering the weather impact that we endured through most of the first three quarters of the year. The business saw a challenging weather environment and decline in profitability particularly in our Ireland UK business although that was somewhat offset by strong demand within our fertilizer and feed businesses with farmers attempting to recover volumes through growth and fodder in the Irish marketplace in particular and also use of feed to compensate for a delayed delivery of feed and fodder on farm again in an Irish context. Our living landscapes business saw reasonable growth with an overall ongoing growth in the contribution to group profits supported to a certain extent by acquisitions and the business continued its disciplined capital allocation returning over 6.7 million to shareholders in the period investing in strategic M&A activity and maintaining a net debt to EBITDA ratio of less than one at year end. Free cash flow was somewhat impacted by the timing of sanctioned payments through the year, but the cumulative free cash flow over the last three years has run at over 115% compared to our target ratio of 80%. Some of the highlights from a strategic perspective, we continue to roll out CAPEX on the existing businesses, particularly on the agricultural side, with a spend in Port of Tyne, building a new blending plant and warehouse in the northeast of England. We've improved our bottling capabilities at a new micropack facility in Timisoara in Romania, and we've invested in a brand new Folic production facility co-located with our seed plant in Alexandro in Poland. And we've continued to invest in our Brazilian liquid and dry production capacity to grow capacity and volumes in Brazil. And alongside that, then, we're continuing to roll out our D365 ERP platform across our Ireland and UK businesses. From an organisational perspective, TJ has taken up the new role of Divisional Managing Director living landscapes business. Colm has joined us as Group CFO. We're showcasing today our refreshed branding across the businesses, which hopefully will assist investors in understanding the business, but also assist our employee brand and external marketing of the business at a holistic level. We've got some new divisions and reporting structure as a result of that. And we're also announcing this morning the appointment of a new non-executive director to the board, Dick Hordak, who is joining again from an agricultural background. So just to outline the new reporting structure for the business, primarily in two reporting segments now, agriculture and living landscapes. with all of our direct-to-farm businesses in sustainable agronomy, our wholesale B2B soil nutrition businesses, and our animal feed businesses reporting in the agricultural segment. And on the living landscape side of the house, we're bringing together our sports, landscapes, and environmental businesses, encompassing and reporting all of those individual business units within a new divisional structure. So perhaps I'll just talk to the agricultural segments before TJ will take you through the living landscapes businesses. So from an Ireland, UK perspective, the operating profit in the segment was down in 2024, primarily as a result of a very difficult and challenged UK planting season and application challenges within the early part of spring and right through the autumn, in fact. and there was a significant reduction in revenue in that segment of the business mitigated somewhat by operational efficiencies and cost controls across the business. Our sustainable agronomy or agribusiness was impacted by difficult weather that reduced planted area primarily down within the winter wheat and winter barley segment and a strong move to spring cropping which as you know requires lower grower investment and less spend by farmers as a result. Our soil nutrition businesses saw a strong performance. Operating profit overall was slightly reduced due to falling commodity markets, but we did see a volume recovery in that business and we're pleased with that. Our animal nutrition businesses, as we said earlier on, saw increased volume from challenging in-field conditions, which really drove demand for supplementary concentrate feed in the period. So overall, the business saw a reduced level of profitability. When you compare it to our previous challenging weather year of 2020, you can see it significantly outperformed relative to that 2020 From a continental European perspective, we were pleased to see continued growth in operating profit performance in the business. Our Polish business delivered very strong results with a very stable cropping area and high disease pressure and the new folic fertilizer plant has now been completed and production ramp up will begin there over the course of the next 12 months. Our Romanian business achieved a solid performance despite Two consecutive years now were very dry conditions in Romania, which is impacting product demand, is impacting harvest yields and farm profitability. So it is seeing fairly challenging weather conditions there. But despite that, we delivered a strong performance in the period. And the micropack facility that we spoke about earlier on the call has now been put in place and will be launched to meet rising demand in that segment. And our Ukrainian business completed closure in the third quarter with no material impact on group profitability in the period. Our Latin American business saw a small dip in profitability, which in the context of the macro environment in Brazil was a very significant result. We did see some currency weakness pulling back the result from a reported euro perspective, but broadly speaking, we're fairly happy with the performance given what's happening in the market there. As you probably know, Nutrien saw significant write-down of its assets in Latin America over the course of the last six months, and one of the main distributors in the market, AgroGalaxy, also filed for the equivalent of chapter 11 in brazil in recent days so it is quite a challenged market we're seeing significant pressure on farm as a reduction as a result of a reduction in crop pricing but overall we were pleased to grow our volume by over 37 percent we have invested significantly in both sales infrastructure and operational infrastructure to continue to improve our distribution capability So our costs are rising there, but we're pleased that the overall volume in the business is growing strongly as a result of that investment. We had a small margin impact due to mix and there is an increased proportion of the lower margin controlled release fertilizers within the mix and an impact on margin, I suppose, as a result of that investment in the infrastructure in the country. Our cropping data points to continued growth in soy area for next year. The harvest has fallen somewhat as a result of lower yields due to dry conditions and right now is the current key planting time for soy going into next year and there are very difficult and dry planting conditions at the moment so we do expect a delay to drilling and a delay to planting in Brazil for the coming year as a result of that. And we're certainly seeing a slower start to the year this year as a result of the very dry conditions being experienced in Brazil. So I'll hand over to TJ now for our living landscapes review.

Thank you, Sean. Good morning, everyone. Within our living landscapes division then, which now accounts Just over 14% of group operating profit, up from 12% in the prior year. Overall delivered a good performance during the year with earnings up by 7%, helped by the positive contribution of acquisitions in the current year and from prior years. Albeit there was some negative impact from the prolonged wet conditions across the UK, which reduced application windows and impacted the sports turf products within our sports business. Within our landscape business itself then, which includes, among others, green tech and British hardwood trees, it had a good year of growth overall, and I would say continues to benefit from what is ongoing public and private investment within the urban greening and infrastructure projects space. Our environmental businesses, which include Keystone and Neo-Environmental, also continue to grow as the macro drivers there, such as legislative changes around biodiversity net gain, And the ongoing acceleration of the move to more renewable energy sources really plays to the strengths of those businesses. And you will also have seen that subsequent to the year end, we completed two further bolt-on acquisitions within the environmental space, Avian and Boland Ecology. During the year then, the group completed two relatively modest acquisitions in Ground Tracks, which is a specialist supplier of ground protection and reinforcement systems And Suregreen, again, a UK-based landscape and gardening product supplier for trade professionals and DIY customers, which we bought out of administration earlier in the year. These acquisitions provide extensions to the product range ultimately and our channel offerings in both the sports and landscape businesses within Living Landscapes. We completed this market assessment across the UK and specific Western European markets which looks across the verticals of both products and services where we already participate today, albeit purely in a UK context. When we stand back from this view, it tells us that there is a significant market opportunity out there across both the UK and those specific Western European markets. And also that there is quite a lot of fragmentation in these sectors, similar to what we would see in the UK today. And we believe ultimately that these markets provide potential for us to drive further M&A growth out into the future.