Drought, goodwill charge hits PGG Wrightson

Mark Dewdney, the new chief executive of PGG Wrightson. Photo / Sarah Ivey

PGG Wrightson, the rural services company controlled by China's Agria Corp, took a $321 million charge to write off goodwill from its 2005 merger while posting a decline in operating earnings in line with guidance on the effects of this year's drought.

The net loss was $306.5 million in the 12 months ended June 30, from a profit of $24.5 million a year earlier, the Christchurch-based company said in a statement. Sales fell 15 per cent to $1.13 billion. Stripping out the impairment, net profit would have been $14.6 million, missing First NZ Capital expectations for net earnings of $19.4 million.

The company first warned of a decline in operating earnings in May, citing the dry climate in Australia and New Zealand, lower livestock value and falling earnings from its Agri-feeds unit after disposing of its 4Seasons Feeds joint venture. Operating earnings before interest, tax, depreciation and amortisation was $45.8 million, within its $40 million to $48 million guidance.

"Drought in the North Island and in parts of Australia, as well as reduced prices for key agricultural commodities made late-autumn trading conditions challenging and our business units experienced varying fortunes in the year to June 2013," chief executive Mark Dewdney said in the statement.

Dewdney took the top job July after George Gould announced his resignation, ending a two-and-a-half year spell leading the rural services firm.

The shares last traded at 32 cents and have fallen 27 per cent this year and the company dropped out of the NZX 50 Index in March. Wrightson will pay a final dividend of 1 cent a share, adding to its interim payment of 2.2 cents. The record date is Aug. 30.

Goodwill, largely resulting from the 2005 merger of Wrightson and Pyne Gould Guinness, was written off after a board review. The company said the board reviewed factors including the share price, slower than expected recovery "and a range of external variables."

The impairment was spread between Livestock ($80 million), AgriServices ($109 million), other AgriServices ($29 million) and AgriTech ($212 million), meaning all those divisions reported net losses in the latest year.

The company's retail arm, which includes Rural Supplies and Fruitfed, had a 27 per cent decline in revenue to $433 million, while operating EBITDA rose to $23 million from $21.8 million.

Livestock sales fell 26 per cent to $98.5 million and operating EBITDA declined to $12 million from $18 million. AgriServices had a 21 per cent drop in revenue to $709.5 million and little changed operating EBITDA of $46.2 million.

Other AgriServices, which includes insurance, real estate, irrigation and pumping, AgNZ, wool and South American operating, reported a 4.5 per cent gain in annual sales to $177.6 million and lifted operating EBITDA to $10.8 million from $6.3 million.

AgriTech, which includes seeds and grain, Agrifeeds and South American operations, had a 3.7 per cent decline in sales to $419 million while operating EBITDA declined to $24.7 million from $30 million.

Chairman John Anderson said the company expects "continued improvement in the fundamental performance of the business through 2013/14 based on stronger agricultural commodity prices and assuming a return to normal conditions on farm."