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Wrightson claims credit for doubled year profit to $21.2 m


Thursday 22nd August 2002

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Rural services company Wrightson Ltd had one message for the market today as it delivered a profit almost double the previous year's -- we made it happen.

Wrightson's June year net profit rose to $21.16 million from the previous year's $10.7 million profit, as New Zealand's commodity sector experienced the best year in recent memory.

Chairman John Palmer told a briefing today that although the buoyant rural sector played its part, "this is a company making its own future".

Wrightson wanted to be able to ride out any falls in the fluctuating international commodity cycle, cutting costs and diversifying its business to keep up earnings even when lower milk, meat and wool prices hurt farm incomes.

"The favourable sector conditions provided a solid foundation from which to make further progress towards Wrightson's twin goals of reducing its exposure to changes in the commodity cycle and exchange rates, and producing more sustainable earnings," Mr Palmer said.

Wrightson achieved the profit despite a fall in group revenue to $669.3 million, from $704.8 million, indicating it was in a fairly strong position to meet its goal.

Cash flows were strong, the company had no term debt, and it had convincingly turned itself around from a $9 million loss in 1998.

Wrightson's star performers were its seed division, which had little exposure to the vagaries of the commodity cycle, and livestock, which was affected by changing international prices.

Its wool division was the poorest performer.

Livestock and wool pre-tax earnings was $13.8 million, rural supplies provided $8.4 million, seed and grain earnings was $10.6 million, while other businesses and costs soaked up $1.0 million.

The company was also relaunching its financial services division.

Mr Palmer said the company's aim of providing a "solutions-based business" had begun to realise financial and operational gains.

Wrightson had been seen as something of a "sleeping giant" in the area of farm supply and logistics, which it wanted to change, managing director Allan Freeth said.

"Wrightson is well advanced with building a logistics operation that matches best practice in the industry. This will significantly improve the way product moves from Wrightson's many suppliers to its network of 77 stores, and from stores to clients," Dr Freeth said.

The company aimed to increase its tailored solutions business to about 40 percent of group revenue.

Examples included the supply of 1.5 million lambs to supermarkets in the United Kingdom last season, which was set to continue, and creating a direct link between foreign carpet makers and New Zealand wool farmers.

Dr Freeth said Wrightson would not have performed as well as it had if it had remained the traditional stock and station agent it resembled when it reached crisis point four years ago. The company had been forced to restructure into a more client-focused and strategic operation.

"I've said for years, being a `ticket clipper' livestock company wasn't sustainable ..."

Dr Freeth said Wrightson was on track to meet, and probably surpass, his informal target of pre-tax earnings of $50 million by 2005, which had become something of a company mantra if not a strictly accepted forecast by the board.

The company had a positive outlook for New Zealand's rural sector for the next 12 months, despite a slide in international commodity prices this year.

Wrightson was aiming to reduce costs to 70 percent of revenue, from the current 83 percent.

Expenditure last year was contained as a result of reduced costs in Australia, Uruguay and the wool business, and the absence of unusual write offs and costs experienced in past years.

Its New Zealand profit was $18.1 million, after $4.6 million of strategic expenditure on several initiatives, including an alliance with biotechnology partner Genesis Research and Development Corp, and the investment in a strong wool marketing concept company, OneWool.

Wrightson's profit from Australia was $3.3 million -- a substantial improvement over the underlying result last year of $200,000 -- and it made a small loss in Uruguay ($200,000) as effects of Argentina's economic devastation spread, reduced from a $1.2 million loss last year.

It posted a fully imputed eight cents per share dividend, making 11.5cps for the year, up from 8.5cps the previous year. It will be paid on September 27.

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