Weather hits PGW's profit results

PGW's wool procurement and brokering business was affected by the collapse of global crossbred wool prices

PGG Wrightson chairman Alan Lai has described the company's full-year financial performance as ''very positive'', particularly as it had been expected to be a tougher year than the previous one.

The rural services company yesterday announced operating earnings before interest, tax, depreciation and amortisation (ebitda) of $64.5million for the year to June, down $5.7million on last year's result.

After-tax net profit was $46.3million, up from $43.8million the previous year. The company will pay a fully imputed dividend of 2c per share in October, bringing the total fully imputed dividends paid for the year to 3.75c per share - the same as last year.

The company had previously indicated it thought the year was going to be more challenging than the previous one, as it expected lower commodity prices to lead to reduced farmer spending, Mr Lai said.

What could not be foreseen was the impact of the very wet conditions in New Zealand over the final quarter.

Together, those factors brought the company's full-year results towards the midpoint of its guidance range.

PGW chief executive Mark Dewdney said the company's New Zealand seed and grain business was most affected by the severe weather events in April - including two sub-tropical cyclones.

Autumn demand for seed products was less than expected as many farmers had been unable to complete regrassing and autumn pasture renewal plans.

For grain, much lower harvest yields had reduced earnings from the company's processing and drying facilities.

PGW's livestock business delivered a record operating ebitda as strong international demand for protein and lower stock numbers combined to push up livestock prices and retail performed ''extremely well'', Mr Dewdney said.

In contrast, the performance of PGW's wool procurement and brokering business was affected by the collapse of global crossbred wool prices over the past 15 months, resulting in much less crossbred wool sold. The company's wool export business increasing its profitability was was ''pleasing'', he said.

South America was a good performer in seed and grain during 2017, bouncing back with a lift on last year's operating ebitda.

As the company entered its 2018 financial year, market conditions were improving.

The weather impact on autumn planting had affected many New Zealand farmers and the implications of that, both on livestock supply and crop production, would be a key factor in the year ahead.

In South America, there had been a positive recovery this year.

The long-term effects of the April 2016 flooding on farmer confidence, and their demand for inputs, was likely to remain a constraint in the near term.

- Otago Daily Times