PGG Wrightson, the rural services firm controlled by China's Agria Corp, beat its guidance with an 18.4 per cent gain in annual earnings, led by an improved performance for seed and grain. It declared a lower final dividend after investing in businesses in Uruguay and Australia.
Operating earnings before interest,tax, depreciation and amortisation (ebitda) rose to $69.5 million in the year ended June 30, from $58.7 million a year earlier, the Christchurch-based company said. Sales from continuing operations fell slightly to $1.2 billion from about $1.22 billion. Ebitda beat both Forsyth Barr's forecast of $67.5 million and the company's forecast range of between $66 million to $69 million. Net profit fell to $32.8 million from $42.3 million, which the company said reflected a lower effective tax rate and one-time gains in the previous year.
Wrightson's "diversified portfolio" had helped cushion the company from volatility in particular sectors, such as the slump in dairy, said chief executive Mark Dewdney.
Last month the company agreed to buy the assets of Australian seed business Grainland Moree and a 50 per cent stake in Uruguayan rural services company Agrocentro Uruguay for undisclosed amounts.
"Challenging market conditions in the dairy sector have resulted in reduced demand for some of our lower margin activity such as grain, fertiliser and supplementary feed, and this partly explains the flat revenue year on year," Dewdney said.
"Despite the dairy sector challenge in the second half, most of our individual business unit financial results have improved." Wrightson will pay a fully imputed final dividend of 2c a share on October 1, bringing payments for the year to 4c. Payments of 5.5c for 2014 included a 1c special dividend.
The company's seed and grain business delivered the biggest uplift in operating ebitda, up 19 per cent to $40.3 million, even while sales dropped to $400.9 million from $452 million. Livestock earnings rose 15 per cent to $13.4 million as sales rose to $86.7 million from $76.9 million, while retail earnings rose 7 per cent to $27 million as sales rose almost 2 per cent to $494 million. Total rural services - everything except seed & grain - recorded a 2.9 per cent gain in earnings to $54.5 million.
The difficult outlook for dairy means Wrightson may struggle to lift earnings again in the 2016 year.
"Given the current volatility in a number of markets, and the need to assess the likely impact of this on PGW's clients, it is the company's intention to defer providing a forecast for the current fiscal year until the annual shareholders' meeting in October," Dewdney said.
PGG Wrightson's shares closed down 1c yesterday at 45.5c. The stock is rated a 'buy' based on three recommendations compiled by Reuters, with a target price of 51c.
