PGG Wrightson full-year profit gains 5.7% as lower debt costs offset stalled revenue growth

Tuesday 8th August 2017

PGG Wrightson posted a 5.7 percent gain in full-year profit, meeting its guidance, as the rural services company benefitted from lower interest costs, offsetting stalled growth in revenue.

Profit rose to $46.3 million in the 12 months ended June 30, from $43.8 million a year earlier, the Christchurch-based company said in a statement. Sales fell to $1.13 billion from $1.18 billion.

The company warned investors in June that earnings would be at the low end of guidance thanks to wet autumn conditions that hampered the harvest in New Zealand and weighed on the performance of Wrightson's seed and grain business. Today chairman Alan Lai said the company had been bracing for the impact of lower commodity prices but hadn't banked on unfavourable weather.

"We thought this year was going to be more challenging than FY2016 as we expected lower commodity prices to lead to reduced farmer spending," Lai said. "What we could not foresee was the impact of the very wet conditions in New Zealand over the final quarter."

Still, he was upbeat about the current 2018 year, saying market conditions "are improving", with higher pretax earnings, although net profit "should reduce to a more normalised level as we will not have gains from the divestment of properties."

Full-year operating earnings before interest, tax, depreciation and amortisation fell to $64.5 million from $70.2 million, slightly better than its June forecast for ebitda to be in the bottom half of its earlier guidance for earnings of between $62 million and $68 million.

Operating ebitda for seed and grain, its biggest business, fell to $37 million from about $42 million as sales slid 5.4 percent to $428.7 million. Agency ebitda fell to about $18 million from $18.2 million as sales dropped to $197 million from $228 million. Retail and water ebitda fell to $18.3 million from $20 million, while sales gained to $562 million from $550 million.

Wrightson yesterday confirmed a change in its reported operating segments, with rural services split into two segments - agency and retail and water, while seed and grain remained as is.

By region, New Zealand revenue fell to $954 million from $978 million, while Australian sales dropped to $79 million from $86 million and South American sales fell to $99 million from $118 million.

The company will pay a fully imputed dividend of 2 cents a share on Oct. 4, bringing total payments for the year to 3.75 cents, unchanged from 2016.

Its shares last traded at 60 cents and have gained 21 percent this year. Wrightson is 50.2 percent owned by Agria Corp.

(BusinessDesk)

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