PGG Wrightson downgrades forecast as trading conditions worsen

Rural services firm PGG Wrightson has downgraded its earnings forecasts.

Rural services firm PGG Wrightson has revised down its operating earnings guidance for the current June year due to deteriorating market conditions.

The company now expects its operating earnings before interest, tax, depreciation and amortisation (Ebitda) to be around $43 million for the year, down from a previous guidance of $50m. The new guidance compares with PGG Wrightson’s Ebitda of $61.2m for the June 2023 year.

“Since releasing our half-year results in February, trading conditions have deteriorated because of market conditions that are impacting the whole of the agricultural sector,” PGG Wrightson chairman Garry Moore said.

PGG Wrightson said the factors restraining spending patterns in the rural sector included:

• Drought conditions with soil moisture deficits against historic averages across much of the East Coast, Tasman and Northland over the first quarter of 2024.
• Weak sheep meat demand from China and increased supply culminating in lower farmgate returns.
• Interest rates and input costs remain elevated, impacting on-farm and on-orchard profitability with clients looking to reduce debt and defer spend.

PGG Wrightson said although the harvest season has been broadly positive, there is a time lag in the conversion cycle before farmers and growers see the financial benefits from their harvest production.

“Whilst we have seen a slight uptick in farmer and grower confidence in recent months, this is off a low base and sentiment in the sector remains subdued,” Moore said.

“Despite the present difficult market conditions, we remain positive about the prospects for the sector over the medium to longer term and have confidence that PGG Wrightson is well-placed to support our clients through these challenging times and beyond,” he said.

Notwithstanding the poorer trading conditions, the company continued to maintain and grow share in the markets in which it operates.

Earlier this month, Moore told the Herald it’s back to business as usual for PGG Wrightson after a boardroom wrangle.

Last month, former PGW chairman Alan Lai’s Agria - which owns 44 per cent of the company - withdrew a notice seeking a shareholders’ meeting to consider several directorship changes.

The New Zealand Shareholders’ Association opposed the moves.

Moore said in the Herald interview it was time to move on after the boardroom tussle.

“The key point is that we are over our governance issues and want to move forward and demonstrate that we are a good shop,” he said.

Moore, an investment adviser with over 36 years of experience, was elected chairman by a majority in February of this year.

The company’s shares last traded at $2.02, up 8c.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.