PGG Wrightson responds to 'wildly innacurate' comments

PGG Wrightson is seeking to correct what it calls "speculative, uninformed and often wildly inaccurate" comment being made about the company.

Chairman Keith Smith today sent a letter to business and rural news editors to clarify various matters arising in recent media comments about PGG Wrightson.

The commentary comes after the company said, in its annual result published on August 27, that under a renegotiation of its banking facilities it had agreed to repay $200 million of debt by March 31 next year.

"My concern is that this has given rise to extensive comment that is speculative, uninformed and often wildly inaccurate," Smith said in his letter today.

Among "clarifications and corrections" he wanted to make, he said PGG Wrightson was not offering to sell businesses that formed part of its operating core.

Reports of preliminary discussions with potential buyers for businesses such as Seeds and Fruitfed Supplies were "entirely wrong", Smith said.

Rather, the company had said in its results that it would review the sale of selected non-core businesses.

"This suggestion was the most damaging of all the comments made over the past few days," he said.

"It was also inappropriate in view of the company's underlying performance, including the doubling in operating cash flow, to $52 million, announced as part of the annual results."

Smith said there was no basis for concern among the approximately 90,000 farmers who deal with the company.

Meanwhile, in a separate development, Craigs Investment Partners said on Friday that it was reducing its target price for PGG Wrightson shares to 74c, down from $1.19, and retained its "hold" recommendation.

Craigs put a valuation on PGG Wrightson of $1.06 a share, based on the company "as is".

"It is clear that the group's structure is likely to undergo a relatively material change in the near future, the result of which is likely to be dilutive to our current assessment of value," Craigs analyst David Oxley said.

Craigs had tentatively tried to model a scenario that involved an accelerated debt-reduction programme.

That would be through internal measures, the sale of the group's finance book for less than Craigs' model suggested it was worth, and a substantial, discounted equity raising.

Until PGG Wrightson could provide greater detail about its funding plans, the likelihood of its success and comfort around the earnings outlook, the stock was likely to remain under pressure, Mr Oxley said.

In the near term substantial risks continued to surround PGG Wrightson stock.

The key attraction of the company was that it provided a relatively rare means of gaining exposure to the export-oriented New Zealand agricultural sector.

The medium term outlook for the agricultural sector appeared relatively bright - on the basis of demographic trends that suggested global supply and demand imbalances were working in its favour, said Oxley.

PGG Wrightson shares were unchanged on 73c at mid-afternoon, having fallen from $2.69 a year ago, but up on the year-low of 59c in February.

- NZPA