PGG Wrightson returns to profit but outlook clouded by dairy slump

Mark Dewdney, the new chief executive of PGG Wrightson. Photo / Sarah Ivey

PGG Wrightson, the rural services firm controlled by China's Agria Corp, posted an annual profit after a year-earlier loss driven by a historical impairment, and held off making a forecast for 2015 because of volatile dairy prices.

Profit was $42.3 million in the 12 months ended June 30, from a loss of $306.5 million a year earlier, when it took a $321 million charge to write off goodwill from its 2005 merger. Sales rose to $1.2 billion from $1.13 billion.

The Christchurch-based company updated its guidance for what it called operating Ebitda in June, to a range of $56 million and $58 million. Based on that non-GAAP measure it reported earnings for the year of $58.7 million, beating guidance and exceeding a Forsyth Barr forecast of $57 million.

Despite uncertainty over dairy prices, Wrightson is upbeat about the outlook, having acquired irrigation businesses and bought back properties it was leasing, including retail stores, seed processing sites and livestock saleyards in the latest year.

"The outlook for our core sheep, beef, arable, horticulture and viticulture markets is positive and will continue to be a major focus for the company, and in addition we are going to put more emphasis on the dairy, water and agronomy sectors in New Zealand," said chief executive Mark Dewdney.

He said the company is confident it will increase operating Ebitda in the current year but "given the volatility in the forecast dairy price at the current time, and the need to assess the likely impact for PGW's clients and the sector," the company would wait until its annual meeting in October to give guidance.

Prices of dairy products tumbled to the lowest since October 2012 in the latest GlobalDairyTrade auction, which came after Fonterra Cooperative Group slashed its forecast farmgate milk payout for 2015 to $6 per kilogram of milk solids from $7/kgMS.
Wrightson's rural services division delivered the biggest contribution to earnings in the latest year, with net profit of $37.5 million, from an impairment-marred loss of $78 million a year earlier. Sales rose 11 percent to $$766 million.

Seed & Grain, which took the biggest share of the previous year's impairment, posted profit of $23.9 million from a loss of $206 million. Sales climbed 9 percent to about $530 million.

Retail lifted profit to $17 million from $15.9 million as sales rose 12 percent to $486 million, while livestock posted profit of $10.4 million from a loss of $73.8 million as sales fell 22 percent to $76.9 million. Profit from Other Rural Services was $10 million, from a year-earlier loss of $20.5 million as sales climbed about 30 percent to $202.8 million.

The company will pay a fully imputed dividend of 3.5 cents a share on Oct. 3, with a record date of Aug. 26. The payment is made up of a final dividend of 2.5 cents and a special dividend of 1 cent a brings total dividends for the year to 5.5 cents.

The shares last traded at 39.5 cents and have declined 1.3 percent this year.

Read the profit announcement here: