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Wild weather hits Wrightson

By Nick Stride

Friday 21st February 2003

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Growth ground to a halt at rural services group Wrightson as "the most difficult spring conditions for farming in the last 20 years" took their toll.

Wrightson's net profit for the December first half fell 35% to $4.1 million.

At the ebit (earnings before interest and tax) level, the surplus was down 32% to $6.8 million.

Even so, chairman John Palmer predicted a "satisfactory" full year result with the company's "strategic initiatives" bedded in and a positive outlook for the rural sector.

Operating cashflow went negative with a $10.9 million deficit this half compared with positive $5 million a year ago.

The company blamed higher inventories, growth in the Integrated Fibre Management business and "the terms of trade applying to forward contracts." But it said full-year cashflows would be positive.

Expenses were up 0.5% to $72.7 million.

The biggest division, rural supplies, was also one of the strongest, with ebit of $2.8 million, down from $3 million a year ago. Sales were down but margins were maintained by growth in "through store" sales.

Falling sheep and beef prices hit the livestock and wool division, where ebit fell to $1 million from $2.4 million.

Wrightson said the average value of sheep handled fell by $5 to $60 and the average value of beef by $120 a head to $580.

The New Zealand seeds business performed "strongly" but the company didn't give figures.

The net loss from the Australian business increased to $1 million from $600,000 but Mr Palmer said it performed well despite the drought conditions and was expected to make a profit in the full year.

The new rural finance arm returned a profit after only a year in business.

Group earnings were reduced by a $2.7 million charge for the continuing restructuring and unusual items. These included reform of the wool trading business and "solutions development."

Wrightson's strategic initiatives are aimed at reducing its vulnerability to the downside of the commodity price cycle.

It aims to do this by containing costs in its commodity businesses and developing and marketing "solutions," such as logistics management, to produce sustainable earnings.

Managing director Allan Freeth said the cross-industry OneWool initiative was on track to go operational this calendar year.

Mr Palmer cited a number of concerns for the balance of the financial year.

These included very dry conditions around much of the country and the economic effects of a war in Iraq.

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