PGG Wrightson’s first half profit slips, cuts annual earnings guidance

Rural services group PGG Wrightson has cut its earnings outlook for 2023. Photo / Supplied

Rural services group PGG Wrightson‘s first-half net profit dropped by 6 per cent to $21.2 million, due to a reduced contribution from its real estate business.

The company has cut its operating earnings guidance for the full year to $57m from an earlier forecast of $62m, which compares with the previous years’ reported Ebitda of $67.2m.

PGW’s first-half operating Ebitda came to $47.8m, up 0.9 per cent on the previous comparative period.

Revenue rose six per cent to $585.8m.

PGW declared an interim dividend of 12 cents per share, down from 14c in the previous first half.

PGW chair Joo Hai Lee acknowledged the people affected by the devastating Cyclone Gabrielle.

The half-year result included new revenue and earnings highs for PGW’s retail and water group, which generated the majority of its earnings in the first half.

This was partially offset by challenges in PGW’s agency business, in particular its real estate business.

“The overall trading performance reflected the healthy state of the group and demonstrates the value that our customers see in the technical expertise of our people and PGW’s full service offering,” the company said.

Chief executive Stephen Guerin said the retail and water business had seen continued growth, building upon the momentum that had been gathering for some time.

Operating Ebitda for retail and water was $48.9m (up $5.2m), and revenue was $500.0m (up $31.0m).

After a record year last year, rural supplies have continued to trade well, with revenue up on the prior comparative period.

While some of this is related to price increases in fertiliser and agricultural chemicals, PGW continued to grow its market share.

“It has been a frustrating season for many with wet conditions and little respite over the three-month critical spring window,” Guerin said.

“Given the tough season through to December for most of the country with continued rain, cooler temperatures and localised flooding, the team has done exceptionally well, despite Covid-19 absentees, staffing shortages, and supply chain issues,” he said.

Fruitfed supplies also had a strong first six months of the financial year and continued to grow and set new benchmarks.

PGW’s agency group delivered an operating Ebitda of $3.6m for the first six months of the 2023 financial year, down $3.8m compared with the same period last year.

“The real estate market was impacted by a general negative sentiment owing to rising interest rates, the decline in property demand and sales, mismatch of vendor-purchaser expectations, shrinking buyer pool, and the raft of regulatory challenges coming to the rural sector,” PGW said.

“As a result, earnings from our real estate business were significantly back from the buoyant market seen over recent years and this explains the majority of the reduction in earnings for the agency operating segment.”

Lee said thinking about the outlook for the financial year to June 30, PGW was well positioned to capitalise upon the opportunities ahead after a strong trading performance over the first half.

“While noting the extraordinarily good 2022 financial year, we hold a degree of caution looking forward for the remainder of the financial year given the volatility in the macro operating environment,” he said.

“Our clients are experiencing an environment with rising interest rates, tightening credit, increased input costs, labour shortages, supply chain disruption, an uncertain geopolitical and domestic regulatory landscape, and adverse weather events including the extraordinary impacts of Cyclone Gabrielle that have hit the agricultural and horticultural sectors hard over large parts of the country.

“The full effects of these dynamics are yet to be assessed.”

Shares in PGW last traded at $4.33, down 3c.