PGG Wrightson half-year profit falls, dividend axed

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The agency division’s earnings more than halved as livestock and real estate sales slowed, and wool prices remained low. (file image)
Photo: RNZ / Nate McKinnon

A slowing economy and commodity prices have dented the half-year profit of rural services company PGG Wrightson (PGW).

Key numbers for the six months ended December compared with a year ago:

Net profit $12.7 million versus $21.2m
Revenue $560.9m versus $586m
Operating earnings $36.6m versus $47.8m
Interim dividend nil versus 12 cents per share

PGW chair Garry Moore said trading had been solid in some of the toughest conditions seen in years.

“Factors such as elevated levels of inflation and interest rates on rising debt levels, together with subdued demand and softer returns in most of New Zealand’s key primary export commodities, have all contributed to create a more demanding environment for many of PGW’s farmer and grower clients.”

Profitability across all businesses fell, with its main Retail and Water division’s revenue down 4 percent from the previous year’s record high, as farmers and orchardists cut spending.

The agency division’s earnings more than halved as livestock and real estate sales slowed, and wool prices remained low.

Moore said the company was cautious about the outlook with a range of pressures from El Niño weather conditions, lower global prices for commodities such as meat, higher costs, and a subdued Chinese economy.

However, the outlook for dairy and horticulture was more positive on higher prices and recovery from Cyclone Gabrielle.

“On balance, we remain cautious and expect to see subdued activity over the remainder of the financial year,” Moore said.

It lowered its full-year earnings forecast to $50m from the previous $52m, while it also decided not to pay a half-year dividend.

“The PGW Board has by a majority determined PGW will reinvest capital back into growing the business by suspending the interim dividend to avoid adding debt in the face of rising interest costs.”

The company’s major shareholder, Agria Corp, is currently pushing to replace three independent directors with four of its own nominees, including a former chair, Alan Lai, who was banned by US financial authorities for alleged market manipulation and forgery.