PGG Wrightson says annual earnings to fall as much as 12% as dairy woes weigh

Wednesday 28th October 2015

PGG Wrightson, the rural services firm controlled by China's Agria Corp, expects annual earnings to fall as much as 12 percent from the previous year, as weaker dairy prices weigh on farm incomes.

The Christchurch based firm expects operating earnings before interest, tax, depreciation and amortisation to be between $61 million and $67 million in the year ending June 30, 2016, compared to the $69.6 million it reported for the 2015 financial year.

Dairy prices recovered in October to be the highest level since March, after an extended drop saw New Zealand's largest export commodity drop from a record and forced Fonterra Cooperative Group to slash its payout to farmers. Lower income for farmers has flowed through to reduced sales for Wrightson.

“While the recent bounce in global dairy prices provides welcome relief for the sector, our view is that this news has come a little late for New Zealand dairy farmers to materially increase their spending with us for the current season," chief executive Mark Dewdney said in a statement. "A low dairy pay-out forecast at the time farm budgets were set remains the key reason we believe our earnings may dip in 2016 from last year’s excellent result."

Wrightson has been expanding its operations, agreeing to buy the assets of Australian seed business Grainland Moree as well as a 50 percent stake in Uruguayan rural services company Agrocentro Uruguay for undisclosed amounts.

Dewdney said despite the weaker dairy prices, Wrightson was ahead of expectations for the first quarter, without being more specific. The New Zealand seed business had a strong start to the financial year, he said.

The profit warning comes ahead of the company's annual meeting in Christchurch today.

Wrightson shares last traded at 43.5 cents, and have gained 4.8 percent over the past 12 months.

BusinessDesk.co.nz

Comments from our readers

No comments yet