By mid-afternoon, the stock was down 34c or 10 per cent at $2.89.
“The PGW board has by a majority determined PGW will reinvest capital back into growing the business by suspending the interim dividend to avoid adding debt in the face of rising interest costs,” the company said.
PGW said it had performed well in difficult market conditions impacting the primary sector and wider economy.
“It is recognised that uncertainties remain and it is prudent to wait until the full financial year is complete before reviewing the dividend payout ratio.
“Recent levels of dividend have been at the upper end of the payout ratio for the sector and are not sustainable.”
Newly-installed chair Garry Moore said the company had traded solidly during the half in “materially more challenging market conditions”.
High inflation and interest rates on rising debt levels, and subdued demand and softer returns in most of New Zealand’s key primary export commodities had been challenging for many farmer and grower clients, Moore said.
“This half-year result can be described as steady in the context of the headwinds the sector and the wider economy face.”
In response to trading conditions, PGW had been actively managing and reducing spending in a range of cost areas.
At the same time, it had seen increased costs through supplier price rises.
Favourable weather in Australia in recent years resulted in farmers building up sheep flocks, with numbers estimated to the highest in 15 years.
However, recent dry conditions in Australia resulted in record slaughter numbers - up 16 per cent from the previous year.
This excess supply negatively impacted farmgate sheep meat returns on both sides of the Tasman, PGW said.
The result showed that financing costs were $1.4m higher due to higher interest rates.
“Whilst the factors impacting market sentiment are mixed and slightly pessimistic in the near term, we are confident that PGW remains in a strong position to capitalise on opportunities as they arise and maintain the positive performance trend that PGW has demonstrated over the past five years,” it said.
Longer-term prospects for the New Zealand primary sector remained strong with the Ministry for Primary Industries projecting steady growth, the company said.
Earlier this month, PGW said the board had by a majority elected Moore as an independent chair, replacing Singapore-based U Kean Seng, who plans to remain as a non-executive director.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
