Wrightson profits soar 20pc on lower tax

PGG Wrightson chief executive Mark Dewdney. Photo / Sarah Ivey

PGG Wrightson, the rural services firm controlled by New York Stock Exchange-listed Agria Corp, posted a 20 percent gain in full-year profit, largely by paying less tax, while sales fell in a result it said showed it was able to offset a tough year in the dairy sector with gains in other businesses.

Profit rose to $39.6 million in the year ended June 30, from $32.8 million a year earlier, the Christchurch-based company said in a statement. Sales fell to $1.18 billion from $1.2 billion. Wrightson's income tax expense almost halved to $8.8 million from $16 million.

The company pre-announced some aspects of its results, saying last week that operating earnings before interest, tax, depreciation and amortisation "exceeded $68 million in the year". Ebitda came in at $70.2 million from $69.6 million a year earlier as earnings in seed & grain rose 10 percent to $44.6 million and retail gained 7 percent to $29.2 million, making up for a 1 percent decline in livestock earnings to about $15 million.

"The parts of our business most exposed to dairy had the toughest year, and more cautious spending from our dairy clients is the main reason for the small reduction in group revenue this year," said chief executive Mark Dewdney.

"Repeating this operating ebitda result next year will again be a stretch target given current market conditions, but we will give it our best shot," he said, adding that the company will give a forecast at its annual meeting in October.

Dewdney said a number of non-operating items reduced Wrightson's effective tax rate in the latest year, such as gains on sale of property.

Wrightson will pay a fully imputed final dividend of 2 cents a share on October 4, bringing payments for the year to 3.75 cents, down from 4 cents a year earlier. Wrightson shares last traded at 54 cents and have gained 30 percent this year, almost twice the gain of the S&P/NZX 50 Index. The stock is rated a 'buy' based on three analysts who follow the company, Reuters data shows.

A geographical breakdown of revenue shows sales fell 3.6 percent to $978 million in New Zealand, its biggest market, while Australian sales gained 12 percent to $86 million. South American revenue climbed 5.9 percent to $117.5 million.

"As we enter our 2017 financial year market conditions remain challenging," Dewdney said. "Many New Zealand dairy farmers face their third season of cash losses in succession. South America remains difficult to call; while they have had a small bounce in their commodity prices the long-term effects of the April flooding on farmer confidence and demand for inputs remain to be seen."

He said weather in New Zealand, Australia and Uruguay "continues to be a key driver of uncertainty as it typically is in agriculture".

"We still have many improvements in our core business to realise, however, it's too early to tell how these opposing external versus internal forces are going to play out in the year ahead," he said.