PGG Wrightson forecasts lower operating earnings

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Rural supplies business PGG Wrightson (PGW) has downgraded its operating earnings forecast for the year ended June, citing a “significant degree of volatility in the global economy”.

The company now expects operating earnings for the year to 30 June to be about $52 million compared with the $61.2m it reported this year.

Acting chair U Kean Seng said volatility in the global economy was affecting the company, as were New Zealand’s higher interest rates.

“While some parts of the rural sector are recovering from last summer’s cyclones there is also concern about the potential for drought conditions in the coming months due to El Niño weather patterns,” Seng said.

“Demand in key export markets has declined and China’s economic recovery remains subdued.

“These factors combine to hamper confidence and reinforce cautiousness as farmers and growers anticipate the impacts on the profitability of their business operations.”

Seng said the sector faced a challenging year but it expected to see improvement as the economies of key export markets recovered.

“The global population and demand for protein is projected to show continued growth and the fundamentals for the agri-sector remain sound.”

The MPI was projecting steady growth for New Zealand’s primary exports with annual revenue expected to reach $62 billion by 2027, he said.

“On balance, we remain cautious about the financial year ahead given the mixed signals in the macroeconomic environment.”

Trading for the first quarter was back on last year and was influenced by these factors and a subdued real estate market.