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PGG Wrightson reaffirms 2015 earnings growth, signs of weak dairy weighing on market

Monday 22nd December 2014

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PGG Wrightson, the rural services firm controlled by China's Agria Corp, has affirmed expectations for earnings growth in 2015 but is seeing "signs of softness" after Fonterra Cooperative Group cut its forecast farm gate payout.

The Christchurch-based company expects operating earnings before interest, tax, depreciation and amortisation in the year ending June 30, 2015, to be above the $58.7 million it reported in the 2014 year, chief executive Mark Dewdney said in a statement, affirming guidance given at its October annual meeting. Earlier this month, Fonterra cut its forecast farmgate milk price for the 2014/2015 season by 60 cents per kilogram of milk solids to $4.70/kgMS, after global dairy prices halved since the start of the year. 

The agricultural services company said it was starting to see "some signs of market softness in areas related to dairy" while its seed business and retail segment were more weighted to the first half of the year, and had performed well. "Livestock, Seeds Australia and South America all make their biggest contributions in the second half, and results are also impacted by weather and commodity prices," Dewdney said.

"The current market conditions highlight the benefit to PGW of having a diverse product and service portfolio across New Zealand and international agricultural sectors," Dewdney said. "Confidence remains high in the sheep and beef sectors and this strength should see the business well placed if we encounter reduced dairy related spend over the remainder of the financial year.”

The company will give further guidance when it reports its first half earnings in February. 

Wrightson beat its own guidance and analyst expectations with its 2014 result after its rural services and seeds and grains unit underpinned the increased earnings.

Shares of Wrightson last traded at 44.5 cents, and have gained 11 percent over the past 52 weeks. 


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