Higher dollar puts brakes on farmers' spending

Barry Brook says the sector is more competitive. File picture

Farmers' and growers' confidence - and their willingness to spend and invest - is very much on hold, the annual meeting of listed farm services and supplies giant PGG Wrightson has heard.

"We do have to acknowledge market reality and we are facing more intense competition in an unfavourable rural economy," chief executive Barry Brook told the AGM in Christchurch yesterday, the first since Pyne Gould Guiness and Wrightson merged last year.

Chairman Bill Baylis said when the company reported results in August it noted an improved outlook and farmer confidence, heavily influenced by a weaker dollar.

But Baylis said a stronger dollar since meant farmers were noticeably more cautious over spending.

Rural real estate activity had slowed, with transactions taking longer to "consummate".

Also, heavy rain in some areas and dry conditions in others meant livestock sales volumes were down and the wool clip had been affected.

The pastoral seeds business had been hit by the slow start to spring. "On top of this, the current drought in Australia - reputed to be the driest since recording commenced in the early 1900s - has impacted on our business there", said Baylis.

It was likely some recovery would be seen during the rest of the financial year. In the meantime, there was a strong emphasis on controlling costs and capital expenditure.

It was too soon to say what the likely outcome this financial year would be. A more meaningful update would be made in February.

But Baylis believed the merger of PGG and Wrightson would, over time, prove to be advantageous.

"What is required is a little patience as we build on what has been achieved, while at the same time coping with whatever the market conditions throw at us in the interim."

Meanwhile, Brook described the company's first year in difficult conditions - when net profit before one-offs was $10 million under forecast - as "tumultuous".

But, pointing to the 20 per cent rise in the company's loan book, Brook said finance was a significant growth area. Seeds was another area targeted for growth.

"The fundamental focus for us is now on improving operating performance, achieving growth - particularly in the financial services and seed and grain areas of the business - and pushing on with innovation such as the initiatives to be launched in South America."

PGG Wrightson plans to raise more than $100 million for a farming venture in Uruguay, and Baylis announced $15 million of shares in the business had been reserved for allocation to directors and associated parties.

PGG Wrightson shares closed unchanged at $1.67.

Rural restraint

* PGG Wrightson's AGM has been told farmer and grower confidence is "very much on hold" following the recent rise in the dollar.

* Farm services and supplies competition is more intense as well.

* The company is placing a strong emphasis on controlling costs and capex.