PGG Wrightson cuts profit forecast by $3m to $27m

Barry Brook

PGG Wrightson has cut its profit forecast by 10 per cent, after bad weather in the South Island and delays in selling surplus property.

New Zealand's largest rural service company, formed last year by Craig Norgate, yesterday announced it expected a net profit of around $27 million, after a $10 million deduction for amortisation, compared with a previous forecast of $30 million.

The result included $7.5 million in one-off items, PGG Wrightson chief executive officer Barry Brook said.

Shares in the company fell 22c to $2.00.

Brook said a wet May and cold and snowy June in the South Island affected the company.

"We've had reduced livestock activity and farmers haven't been spending to the same extent," said Brook. "The regrassing activities have been down and the wet weather impacted on the maize harvest in the North Island too."

He said some property that became surplus through last year's merger of PGG and Wrightson had taken longer than expected to sell.

Brook would not elaborate but said more detail would be available in the company's annual results announcement next month.

Goldman Sachs JBWere analyst Rodney Deacon was surprised at the size of the downgrade and said the company was previously "pretty adamant" about achieving its $30 million forecast.

Deacon said there could be more bad weather, which could further affect the company's performance.

Forsyth Barr analyst John Cairns said the announcement was not a surprise.

"It is negative but then when you consider the trading environment - they are directly impacted by the climatic conditions, so it's to be expected in a company such as this."

Cairns said the company's confirmation that synergies achieved through the merger of Pyne Gould Guinness and Wrightson were expected to exceed $25 million a year was positive.

* Pyne Gould Corporation, an investment company which holds a stake in PGG Wrightson, yesterday announced it expected to report a year end operating profit above last year's result, notwithstanding more difficult trading conditions in the rural sector.