Shifting economy makes PGG wary of profit predictions

Tim Miles, managing director of PGG Wrightson. Photo / Simon Baker

PGG Wrightson expects profit to rise this year but with earnings weighted to the second half and a rapidly changing world the listed rural services company is shying away from naming a number.

The company said revenue for the year ending June 30 was $1.15 billion, with net profit in line with forecasts at $23.3 million. Forsyth Barr analyst John Cairns said the company had been through huge changes, including recapitalisation, governance and a focus back to the core business, in particular seeds.

"There's a lot of change taking place and really over the next couple of years this company I think could be transformed," Cairns said.

PGG Wrightson shares closed down 4c at 52c yesterday.

Managing director Tim Miles said the company had decided not to give a forecast range for the new financial year. "The reason for that is there's a lot of moving parts at the moment," Miles said. The company earned about three-quarters of its profit in the second half of the financial year.

"Which right now looks a long way off," he said.

"We're mindful of global economic conditions which seem to be changing quite rapidly."

Miles noted activity in grain markets and the drought in Russia. Dairy production in western Europe was influenced by grain, Miles said.

"If grain prices go up then obviously that will be a good thing for New Zealand's dairy industry, which is mainly grass fed.

"So that would be a positive but this is early days and we don't know how that will reflect at the moment."

Earnings before interest, tax, depreciation and amortisation (trading profit) this year would be largely in line, assuming trading conditions remained the same, Miles said.

"At [net profit] level we obviously would be expecting an improvement, we've paid a lot of debt back and so you'd expect to see our interest costs come down substantially and that would flow through to the bottom line."

Chairman Sir John Anderson, who joined the company in February, said the world was in a different place.

"Having flown at quite a few dizzy heights over the past five years it's now about coming to landing ... and looking for quality earnings."

PGG WRIGHTSON

Year ended June 30

Revenue
2010 - $1.15b
2009 - $1.28b

Ebitda
2010 - $70.5m
2009 - $81.1m

Net profit/(loss)
2010 - $23.3m
2009 - ($66.4m)