Wrightson profit growth stalls in first half as cautious farmers spend less

PGG Wrightson's stock agent Tim Pickering inspects this good line of Freisia weaner bulls. PGG Wrightson's profit growth stalled in the first half.
PGG Wrightson's stock agent Tim Pickering inspects this good line of Freisia weaner bulls. PGG Wrightson's profit growth stalled in the first half.

PGG Wrightson's profit growth stalled in the first half, which the rural services company blamed on low prices for dairy and wool and reduced production of red meat which had made farmers more cautious about spending.

Profit fell to $15.99 million in the six months ended December 31, from $16.07m a year earlier, the Christchurch-based company said in a statement. Sales declined to $608m from $623m.

Sales and earnings fell at both the rural services and the smaller seed & grain division in the first half but the company said it was more upbeat for the second half of the year, reiterating its guidance for full-year operating earnings before interest, tax, depreciation and amortisation of $62m to $68m while raising its forecast for net profit to reflect anticipated one-time gains such as from property sales. Flat earnings are an improvement on the year-earlier result, when profit fell 19 per cent.

"Low dairy prices, reduced production of both dairy and red meat, tough wool trading conditions, and a wet start to spring led to cautious spending from New Zealand's farming customers during the six months to 31 December 2016," said chief executive Mark Dewdney.

Trading conditions were expected to improve in the second half "and the early indications for our 2018 financial year are looking encouraging."

The company will pay an unchanged interim dividend of 1.75 cents a share on April 4 with a record date of March 10.

First-half revenue from rural services declined to $437m from $499.8m and operating ebitda dropped to $29m from $32.8m. Within the rural services division, retail revenue rose 4 per cent to $318.9m and ebitda gained 8 per cent to $26.8m, while livestock revenue fell 11 per cent to $27m and earnings slipped 0.8 per cent to $2.6m.

Wrightson is 50.2 per cent owned by Agria Corp, which traded on the New York Stock Exchange until being suspended last November and delisted on January 2. Wrightson's chairman Guanglin "Alan" Lai, who is also executive chair of Agria, had made a takeover offer for Agria last January but withdrew the offer in April.

Wrightson shares last traded at 54 cents and have gained 29 per cent in the past 12 months, outpacing the S&P/NZX 50 Index's 16 per cent gain.

- BusinessDesk

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