PGG Wrightson turns $32.8 million loss into $4.1 million profit by 'restoring focus'
Rural services firm PGG Wrightson has rebuilt its balance sheet and its board after being on the brink of defaulting on loans this time last year.
Off the board is Craig Norgate, the driving force behind the company's frantic period of acquisitions, expansion and a failed meat company merger, and
chairman Keith Smith becomes a director at the end of a tumultuous 12 months.
During one week last February the company's share price halved because of investor alarm about debt levels, fallout from the global financial crisis, the potential cost of a failed partnership deal with Silver Fern Farms, and the refinancing of 30 per cent shareholder (Norgate's investment vehicle) Rural Portfolio Investments.
Norgate was not available for comment yesterday, a spokesman saying he was in a board meeting of another company.
PGG negotiated an eleventh hour deal to refinance loans just before releasing its half year results last February and since has completed a $207 million recapitalisation through share placements and a rights issue.
In total the company raised $250 million of new capital during the half year to repay debt and increase equity in PGG Wrightson Finance.
Chinese agricultural company Agria, was brought in as a cornerstone shareholder and now holds a 19 per cent stake, in December taking up RPI's rights entitlement.
In its latest results for the six months to December 31 PGG has turned around a $32.8 million loss to a profit of $4.1 million although non-operating losses and fair value adjustments had a $47 million bearing on the previous period.
It has seen a sharp drop in revenue - down $152 million reflecting lower dairy payouts, tougher times for sheep and beef farmers and a trough in farm sales which affected the company's finance division. The lack of liquidity in funding had been felt across the farming sector.
Smith - who has been replaced as chairman by Sir John Anderson - yesterday said the company had re-established its balance sheet after a period when the market focus had been diverted by speculation about financial issues.
"Our objectives were to provide confidence to all stakeholders, to provide financial strength and flexibility and to restore focus."
The company was able to pay back a $200 million amortised debt facility three months ahead of schedule and additional debt reduction totalling $70 million is planned for the year using cash earnings, income from its investment in New Zealand Farming Systems Uruguay, working capital and selling some assets.
Smith said with the key trading months of March, April and May to come, it was difficult to predict prospects for the full year. While there appeared to be a general lift in farmer and grower sentiment this was tempered with caution given tighter bank lending and unpredictability of currency and interest rates.
"We are confident that markets for agricultural products will improve due to the continued global demand for food."
Anderson, with a reputation as a Mr Fixit, said the PGG appointment differed from "one of the normal assignments where someone is in trouble. It's quite the opposite because they've got the capital restructure and the board changes, which they signalled."
"There are huge opportunities there, particularly around the seed market," said Anderson, who among other top posts is chairman of TVNZ.
The board has been reduced in size by one to 10 following a review of its composition launched last month by director Sir Selwyn Cushing. Murray Flett, an independent director since PGG's formation in 2005, steps down with another RPI representative, Baird McConnon.
RPI will have a single representative, a new appointee, Alan McConnon. David Cushing will become an alternative director for Agria's chairman Alan Lai and Chris Boddington an alternative for Agria chief executive Xie Tao.
Market commentator Arthur Lim said the company's restructuring provided the opportunity to make a fresh start.
"There's no doubt they have repaired the balance sheet."
He said it was sad that Norgate "a visionary" was no longer involved but his final departure was part of the staged exit over the past year.
"It's back to basics for the company. He took the company as far as it could absorb."
The Silver Fern farms failure came after five years of substantial initiatives.
"At other times you can stumble - but not last year."
PGG shares closed up 2 cents at 60c yesterday.