KEY POINTS:
PGG Wrightson Ltd posted an 80 per cent increase in annual net profit to $73.2 million on improvements across the board, and the company indicated a solid result this year.
For the year ended June 30, profit excluding capital gains, other one-off items and earnings from the NZ Farming Systems Uruguay (NZFSU) rose 35 per cent to $39.2m.
"Performance improvements were achieved by each of our divisions despite the impact of long periods of dry weather, adverse exchange rates and poor returns to sheep and beef farmers," chairman Craig Norgate said.
Revenue at the rural services company increased to $1.3 billion from $1.0 billion, led by a 108 per cent rise in revenue for financial services reflecting growth in the finance book and revenue from NZFSU.
Directors declared a final dividend of 11c per share, bringing the annual dividend to 16cps, up from 12cps the previous year.
PGG Wrightson forecast net profit of between $50m and $55m this year, including a $4.2m performance fee from NZFSU, which the company said was "substantially above market expectations" given the improvement across all divisions.
Forsyth Barr analyst John Cairns said the result was solid.
In terms of the outlook, the macro environment was looking far more positive for the company with its reliance on the sheep and beef part of the industry, Mr Cairns said.
While the result was ahead of market expectations, the stock price had already moved quite strongly in anticipation of the result.
Shares in PGG Wrightson were flat in mid-afternoon trading at $2.80, having hit a record high last week of $2.84.
"Bearing in mind the nature of the business that it's in, which is cyclical and parts of it are relatively low margin type businesses, the stock is looking fairly fully priced," he said.
During the year, PGG Wrightson launched two major initiatives which it said would help drive industry consolidation to improve returns to farmers.
At the end of June, it announced a proposal to spend $220m to buy a 50 per cent stake in meat marketing and processing co-operative Silver Fern Farms, formerly PPCS.
In May, PGG Wrightson revealed an agreement to combine most of its wool business with a new growers' co-operative. The formation of The Wool Company - an interim name - was finished just after the year's end.
PGG Wrightson chief executive Tim Miles said today he was confident Silver Fern shareholders would support the deal at the necessary 75 per cent level when they vote on September 8.
That would enable the industry to start a much-needed consolidation. The alternative was a continuation of the status quo, in which farmers were leaving the industry in droves.
The outlook for agriculture worldwide was strongly positive, with a structural shift in food markets supporting firm prices and further production growth.
Prices received for New Zealand lamb and beef increased gradually in the latter part of the year, and some further increases appeared possible, he said.
Wool prices remained low, while dairy commodity prices were expected to remain at or near recent record levels.
Even with the prospect of some improvement in returns to sheep and cattle farmers, the recent trend to dairy conversion was likely to continue, with a further reduction in livestock numbers.
- NZPA
