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Wrightson profit growth stalls in first half as cautious farmers spend less

Tuesday 21st February 2017

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PGG Wrightson's profit growth stalled in the first half, which the rural services company blamed on low prices for dairy and wool and reduced production of red meat which had made farmers more cautious about spending.

Profit fell to $15.99 million in the six months ended Dec. 31, from $16.07 million a year earlier, the Christchurch-based company said in a statement. Sales declined to $608 million from $623 million.

Sales and earnings fell at both the rural services and the smaller seed & grain division in the first half but the company said it was more upbeat for the second half of the year, reiterating its guidance for full-year operating earnings before interest, tax, depreciation and amortisation of $62 million to $68 million while raising its forecast for net profit to reflect anticipated one-time gains such as from property sales. Flat earnings are an improvement on the year-earlier result, when profit fell 19 percent.

"Low dairy prices, reduced production of both dairy and red meat, tough wool trading conditions, and a wet start to spring led to cautious spending from New Zealand’s farming customers during the six months to 31 December 2016," said chief executive Mark Dewdney. Trading conditions were expected to improve in the second half "and the early indications for our 2018 financial year are looking encouraging."

The company will pay an unchanged interim dividend of 1.75 cents a share on April 4 with a record date of March 10.

First-half revenue from rural services declined to $437 million from $499.8 million and operating ebitda dropped to $29 million from $32.8 million. Within the rural services division, retail revenue rose 4 percent to $318.9 million and ebitda gained 8 percent to $26.8 million, while livestock revenue fell 11 percent to $27 million and earnings slipped 0.8 percent to $2.6 million.

Wrightson is 50.2 percent owned by Agria Corp, which traded on the New York Stock Exchange until being suspended last November and delisted on Jan. 2. Wrightson's chairman Guanglin "Alan" Lai, who is also executive chair of Agria, had made a takeover offer for Agria last January but withdrew the offer in April.

Wrightson shares last traded at 54 cents and have gained 29 percent in the past 12 months, outpacing the S&P/NZX 50 Index's 16 percent gain.

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