- Sales up almost 50% on previous year
- Strong demand continued into fourth quarter
- Shares on single-digit price to earnings
Dublin-based agricultural solutions business Origin Enterprises (OGN) issued a strong trading update for the seasonally-important third quarter to April and raised its full year earnings guidance.
Despite ‘exceptional’ price volatility for both agricultural products and fertilizer, the firm reported a 47% increase in sales to €880 million.
KEY SUPPLIER
With high crop prices supporting sentiment from farmers, and generally favourable weather conditions in the UK and Ireland, continental Europe and South America, demand for its crop protection and seeds surged with agronomy and input sales up almost 50% on a constant currency basis.
In the UK and Ireland, which make up the majority of sales, autumn and winter planting for principal crops are estimated to be around 9% up on last year driven by a 19% increase in oil seed rape planting.
In continental Europe a strong first half saw demand moderate slightly in the third quarter with strong volume sales in Poland and Romania offset by a sharp drop in agricultural activity in Ukraine, as to be expected.
Volume sales in South America rose around 15% thanks to a ‘significant’ increase in deliveries of controlled-release fertilisers following the opening of the firm’s new plant in Minas Gerais.
RAISED OUTLOOK
The firm said it had ‘continued to successfully navigate price volatility and supply chain disruptions across its markets, primarily resulting from the war in Ukraine and ongoing global energy, commodity and general inflationary pressures’.
In addition, it said the strong trading conditions experienced to date had continued into Q4 across all three segments.
As a result, it lifted its full year EPS (earnings per share) guidance from its previously raised forecast of 49c to 57c last month to 64c to 68c prompting another round of broker upgrades.
At the current price of €4.38 the shares are trading on 6.6 times this year’s earnings, an ‘unjustified’ discount to the usual rating of 13 to 15 times according to analysts at Shore Capital.
They add: ‘We believe the shares will start to re-rate once trading conditions become more normalized, less dependent on weather conditions and with the transition to more higher-margin activities and products.’
