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PGG Wrighton reports loss but is optimistic


Monday 29th August 2011

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PGG Wrightson has reported a bottom line annual loss of $30.7 million after a provision for supply of livestock to Silver Fern Farms and other items but is signalling growth in its core seed business.

Earnings before interest, tax, depreciation and amortisation were $49.4 million in the year to June 30, 2011, down from $57.2 million in the same period a year ago. Operating revenue of $1.2 billion was up from $1.09 billion. The company is not paying a dividend. PGG Wrightson shares eased a cent to 45 this afternoon.

When provisions and fair value adjustments totalling $47m were included the company reported a loss of $30.7m compared to a profit of $23.3m the previous year.

The auditor gives an unqualified opinion of the accounts but draws investors' attention to a note in the accounts which describes the assumptions used to determine the value of goodwill. Goodwill is an intangible asset.

In 2009 the company entered into a 10-year livestock supply contract with Silver Fern Farms under which it has to make payments if it is unable to supply.

"Due to the level of supply and current livestock market trends a provision of approximately $9.6m has been made, representing the best estimate of PGG Wrightson’s expected liability for shortfall payments over the remaining contract term," the company said.

Chairman Sir John Anderson said while both the livestock and rural supplies businesses performed well and benefited from improved returns at the farmgate, the group results reflected the impact of extreme wet spring and summer conditions in Australia, the Canterbury earthquakes and a number of restructuring costs.

"We can take a number of positives out of the performance. The balance sheet is strengthened from the divestment of certain non core assets while the successful conclusion of the partial takeover by Agria provides certainty to the business moving forward," Sir John said.

Managing director George Gould said the company was awake to the potential opportunities afforded by expanding our seeds business in core southern hemisphere markets such as Australia and Brazil, and in growth agricultural economies such as China.

The board and management would continue to work towards the goal of long term profitability, he said. "While the company is conscious of volatility in the wake of the emerging global fiscal crisis, we are nevertheless planning for improved earnings for the coming financial year," he said.

China's Agria and New Hope Group own 50.1 percent of PGG Wrightson.

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