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Wynnstay looks to good UK crops to revive profits

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Wynnstay Group said it was looking to a strong UK grains harvest to revive its key agriculture division, which suffered a 24% drop in operating profits, as the mild winter stemmed demand for animal feed.

The grain trading-to-pets group reported a 9.8% decline to £4.70m in group earnings for the November-to-April period, driven by a reduced performance at its agricultural supplies business, which saw operating profits tumble 24% to £2.35m.

The warm winter, while boosting demand for fertilizer as growers got ahead with spring crop sowings, reduced the reliance of livestock farmers on bought-in feed – in contrast to the year before, when a cold spring raised needs for external fodder.

"The unusually mild weather gave rise to a different demand pattern across our products and market segments against the same period last year," Ken Greetham, the Wynnstay chief executive, said.

Better harvest

However, the group said that it was "confident" in prospects for the full year to the end of October, saying that the range of its operations "provides a natural hedge, smoothing the overall impact across the year" of short-term setbacks.

In particular, strong UK crop prospects, after a 2012 harvest marred by low quality and 2013 result by weak wheat volumes, bode well for Wynnstay's arable operations, selling the likes of sprays and seed.

"Following two successive years of unusual weather patterns, which have had a significant effect on all aspects of agriculture, the UK industry appears to be returning to more normalised levels of production," the group said.

"We anticipate that in the second half our arable activities will benefit from the return to more normalised conditions, with a good harvest expected this year".

Furthermore, Wynnstay said that its "fertilizer operations are well placed for continued growth".

The UK wheat harvest will rebound by 27% to 15.15m tonnes, and rapeseed production by 18.9% to 2.53m tonnes, the US Department of Agriculture forecasts.

Market reaction

Wynnstay's earnings announcement - which showed a 3.0% rise to £224.5m in revenues for the half year, boosted by the purchase of a Welsh farm retail business – received a muted response from investors.

"Wynnstay, along with peers Carr's Milling and NWF Group, had an exceptionally good 2013, producing strong year-on-year comparables that were always going to make 2014 a difficult year to demonstrate financial progress," Edward Hugo at VSA Capital said.

Wynnstay shares added 0.8% to $5.86 ¼ a bushel in morning deals in London.

By Agrimoney.com

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