PGG Wrightson gets new chair, returns to profit on weaker sales

PGG Wrightson's new chairman, John Anderson. Photo / Mark Mitchell.

PGG Wrightson, New Zealand's biggest rural services company, named John Anderson as chairman of a revamped board and reported a modest profit on reduced spending by farmers and costs to refinance debt.

Net income was $4.1 million, or 1 cent per share, in the six months ended December 31, from a loss of $32.8 million, or 22 cents, a year earlier, which reflected one-time charges. Profit has tumbled from $34.6 million in the first half of 2008.

Today's announcement marks a changing of the guard in Wrightson's boardroom that will oversee a company with a vastly strengthened balance sheet and a cornerstone investor, Agria, that may help open up opportunities in China.

Anderson, a former chairman of National Bank, replaces Keith Smith as chairman, while Craig Norgate and Baird McConnon step down as directors of a board that shrinks to 10 from 11 members.

Operating conditions "had been very difficult, with revenue reduced by a pullback in customer spending, prompted by the state of farm gate returns and cash flows," managing director Tim Miles said. While there are signs of improvement in some sectors, trading from real estate, livestock and viticulture had been weaker than expected.

The company's forecasts in November, for full-year EBITDA of $73 million and profit from continuing operations of $24 million, "remain broadly consistent with the board's expectations" though with several key months to come, it is difficult to predict the full-year outcome, the company said.

Sales in the first half fell 20 per cent to $583 million, while cost of sales dropped about 23 per cent to $448 million.

Net interest and finance costs jumped to $24.2 million from $15.8 million, reflecting establishment fees from the renegotiation of bank facilities, costs of the new subordinated debt facility and hedging expenses, the company said.

Wrightson raised a net $207 million of new capital via share placements and a rights issue, allowing it to repay some $200 million of debt ahead of schedule and renegotiate long-term funding arrangements. It also repaid $22.8 million borrowed from South Canterbury Finance.

The capital raising "enable Wrightson to re-establish a solid financial position after a period in which customer and market focus had been diverted by speculation about financial issues," outgoing chairman Keith Smith said.

"There appears to be a general lift in farmer and grower sentiment from recent improvements in dairy commodity prices and global economic conditions," the company said in its commentary. "Expectations must be tempered with caution, given the uncertain outlook for other agricultural sectors, tighter bank lending environment and the unpredictability of currency and interest rates."

Wrightson again didn't receive a performance fee under its management contract with NZ Farming Systems Uruguay, having been paid $11.9 million in the first half of 2008.

The shares traded at 58 cents yesterday and have declined about 33 per cent in the past six months.