Dairying woes hurt PGG Wrightson

PGG Wrightson, the local sharemarket's primary rural sector player, has slashed its earnings forecast for the third time in six months, citing the global recession which it says is hitting the dairy sector particularly hard.

The rural services company said it now expected to report June year net operating earnings of between $30 million and $32 million, down from the $36 million to $42 million range advised earlier this year when it disclosed a higher interest bill.

In December, the firm revised its outlook to a $39 million to $45 million range from $46 million to $51 million.

Company shares fell as much as 10c on yesterday's news but crept up from their lows to close 8c lower at $1.12.

PGG Wrightson said the key factor in the revised outlook was "the impact of the global recession and a significant recent slowdown in dairy activity during our peak trading period".

The recession and the recent cut to Fonterra's payout "are dampening farmer confidence restricting spending in the autumn season".

That had been compounded by Fonterra's requirement for members to "share up", buy new shares if they wanted to sell additional production.

And although sheep and beef farm incomes had improved but this had yet to flow through into expenditure.

The firm's previous earnings forecast downgrade was driven by "non-trading items", including possible further writedowns of its stake in NZ Farming Systems Uruguay, "mark to market" revaluations of interest rate hedges, and costs associated with the settlement stemming from the abortive merger with Silver Fern Farms.