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Agribusiness Origin under pressure in crucial second half

Bad weather and low prices knocked the agriservices group, which will need to rely heavily on the second half of the financial year
March 14, 2016

It's normal for agribusiness group Origin Enterprises (OGN) to rely on the second half of its financial year to boost annual numbers. As much as 95 per cent of earnings come in that period, but the pressure could be even greater this time around given the weaker start.

IC TIP: Sell at 6.60€

The group reported a 5 per cent slump in turnover due to lower prices and volumes in its various business areas, which include fertilisers and agronomy services. This knocked earnings, leading to an operating loss of €314,000 (£245,000), as well as lower profits from associated businesses following its sale of Valeo Foods in July last year.

Management says the autumn and winter cropping base in the UK should set it up for a strong second half and full-year adjusted earnings per share guidance of 51¢-53¢ has been maintained. However, this assumes "normal weather patterns and no material adverse change in current exchange rates" and, what's more, the combined winter and spring cropping area is 1.6 per cent lower than last year at 4.29m hectares.

Encouragingly, the Polish division performed well and two acquisitions in Romania have helped develop Origin's business there. Analysts at Goodbody expect adjusted EPS of 51.8¢ in 2016, down from 60.1¢ in 2015.

 

ORIGIN ENTERPRISES (OGN)
ORD PRICE:660¢MARKET VALUE:£834m
TOUCH:659-660¢12-MONTH HIGH:925¢LOW: 609¢
DIVIDEND YIELD:3.7%PE RATIO:NA
NET ASSET VALUE:189¢*NET DEBT:72%

Half-year to 31 JanTurnover (€m)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20155321.72164nil
2016507-8.21-5243.15
% change-5---

Ex-div: 31 Mar

Payment: 15 Apr

*Includes intangible assets of €182m, or 144¢ a share

£1=€1.28