Tuesday 22nd October 2019
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PGG Wrightson devoted a chunk of today's annual meeting showcasing its Fruitfed Supplies division, with the country's biggest rural services supplier upbeat on the outlook for horticulture.
The board affirmed annual operating earnings guidance to exceed $30 million in the year ending June 30, up from $24.4 million in the June 2019 year. Chief executive Stephen Guerin singled out Fruitfed Supplies for special attention in his presentation in Christchurch, saying it had featured in the firm's operational highlights year after year, and that Wrightson expects that trend to continue.
"The horticulture sector continues to go from strength to strength with a growing global demand, and a growing trend of conversion of livestock farms to orchards and vineyards in key areas across the country including Northland and Marlborough," Guerin said in speech notes published on the stock exchange.
Fruitfed Supplies sells a range of products and services to horticulture producers, but also provides support to farming customers in areas not covered by Wrightson's rural supplies arm.
Guerin said a major driver of growth for the unit was its provision of technical expertise and ongoing research and development.
"As a result, our team often becomes an integral part of our customers’ business. We strongly believe that’s our point of difference and it is providing us with year on year growth, along with an enviable market share position," he said.
Fruitfed Supplies averaged 4.9 percent annual revenue growth since 2015, and is staffed by 157 people across 15 stores nationwide. Revenue growth had been running at a 6 percent-plus between 2016 and 2018, slowing to a 2.6 percent pace of growth in 2019.
Guerin noted the government's proposed freshwater regulation - which would restrict increases in the area of land in irrigated horticultural and pastoral production above 10 hectares - as potentially weighing on the generally upbeat forecast for the horticulture sector.
"We will continue to invest in our people, our research and development, and our facilities to ensure the Fruitfed Supplies business is well prepared to support this sector," he said.
Wrightson said the performance of the water business disappointed in the 2019 financial year due to a lack of farm development, but restructuring to reduce costs would likely flow into 2020.
The company said demand among sheep and beef farmers for its 'Go' products - where livestock are purchased and owned by Wrightson but a farmer decides on when and where to sell - remained strong, and Wrightson was considering how to expand the offering.
Wrightson said it expects global demand for protein and industry adaptation to Mycoplasma bovis management to flow through to improved trading, and acknowledged the emergence of strong iwi-based farming businesses.
The company said soft global demand for crossbred wool would weigh on its wool business, and it expected a subdued rural real estate market in the coming year.
Wrightson shares increased 0.8 percent to $2.50, and are up 12.3 percent so far this year.
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