KEY POINTS:
An anticipated downturn in demand for rural properties has seen rural service company PGG Wrightson drop its net earnings forecast range by $5 million.
In an announcement to the NZX today, the PGG Wrightson board said a review of the group's net earnings for the year ending June 30, 2009 were likely to be within the range from $39m to $45m.
The previous earnings guidance was for a range from $46 million to $51 million.
The revised guidance still represents an increase of up to 15 per cent (for the upper $45m figure) on the prior year's operating earnings.
In the year ended June 30, 2008 PGG Wrightson recorded net earnings of $39.2m.
The key factor in the revised outlook was an anticipated loss in the group's real estate business, given the impact of economic conditions on demand for rural and other properties.
Real estate performance is now expected to be $11 million below budget and last year.
Total farm sales for the year to November 30 this year were 39 per cent lower by units than for the same period in 2007.
In November alone rural sales were down 64 per cent, according to the Real Estate Institute of New Zealand.
PGG Wrightson said the market outlook for the rest of the season was relatively uncertain. It was dependent on rural sector performance, interest rates, lenders' appetites for rural lending, currency exchange rates and other factors.
The real estate business was performing as well as could be expected and beyond this season real estate earnings were expected to recover.
The operating performance of most of the group's other businesses remained strong despite the difficult economic environment.
While there has been a reduction in the price outlook for some key agricultural commodities, this has not as yet had a significant impact on purchasing and other activity by PGG Wrightson's farmer clients.
The position reported at the annual meeting on October 30 - whereby most businesses within the group were either ahead of or on budget - remained the case as at the end of November.
PGG Wrightson said net earnings for the half year ending December 31 would also be affected by a writedown in the value of its 11 per cent shareholding in NZ Farming Systems Uruguay Ltd, costs associated with the termination of the partnership agreement with Silver Fern Farms Ltd and the "marking to market" of interest rate hedges and adjustment of defined benefit superannuation scheme surpluses under International Financial Reporting Standards.
It was not yet possible to be definitive about the extent of any impact from such factors.
- NZPA
