KEY POINTS:
Revenue at PGG Wrightson has topped a billion dollars and the rural services business says the global outlook for agriculture is strong.
Revenue for the year ending June 30 was $1.22 billion, up from $948.6 million the previous year. Net profit was up more than 80 per cent
to $73.2 million.
Chairman Craig Norgate was one of the brains behind the merger of Pyne Gould Guinness and Wrightson in 2005 and became chairman at last year's annual meeting.
The merger had delivered, Norgate said.
"The company's now executing very well across the business and is beginning to provide industry leadership.
"Performance improvements were achieved by each of our divisions despite the impact of long periods of dry weather, adverse exchange rates and poor returns to sheep and beef farmers."
A more comparative measure of profit excluding capital gains, one-off items and a new earnings stream from NZ Farming Systems Uruguay, was up 35 per cent to $39.2 million, the company said.
NZ Farming Systems Uruguay was set up by PGG Wrightson to develop dairy-farm operations in Uruguay and floated on the NZX in December.
PGG Wrightson holds the fund and farm manager contracts for NZ Farming Systems, and was paid a performance fee of $17.8 million for the year.
The company forecast profit for the current financial year of between $50 million and $55 million, excluding any share price appreciation and one-off items but including a budgeted $4.2 million performance fee from NZ Farming Systems.
The forecast was about 12-14 per cent up on market expectations, Norgate said.
"Some pretty good improvements [this year] across the board, certainly nowhere is going back. other than our budgeted performance fee."
The big story of the past year was the soft commodity boom and there had been a structural shift in food prices, Norgate said.
"Expect dairy prices to remain firm," he said. "From a supply and demand balance point of view, if anything things are slightly better than they were this time last year."
In May, Fonterra raised a record forecast payout for the past season to $7.90 per kg of milksolids, compared to $4.46 the previous season, with an opening forecast for the new season of $7.
Sheep and beef farmers could expect a significant lift in the fortunes during the coming year with higher prices feeding through and a decline in the dollar.
However, the trend of converting farms to dairying was expected to continue given the relative returns between the sectors.
The sun was going down on the Southland sheep industry with several hundred farmers in the South Island having switched to dairying during the past year and more than 200 planning to convert in the coming season, Norgate said.
The company would keep investing in dairying, which now accounted for nearly a quarter of business, but was putting resources into sheep and beef.
"Because we don't want to see agriculture as a one-show pony."
PGG Wrightson had agreed to buy half of meat processor co-operative Silver Fern Farms for $220 million, in a deal promoted as creating a pasture-to-plate supply chain and a platform for industry rationalisation. The deal needed 75 per cent support from Silver Fern shareholders who would vote at a special meeting on September 8.
"I think you may have some chaos in the industry if this thing doesn't go through because the alternative's not very palatable for farmers," Norgate said. "What we do as a company [if it fails] we're still holding counsel on that because in that environment I think we've got to be very careful how we react."
Shares closed up 4c yesterday at $2.84.
