Wrightson says weaker performance in Australia, South America, offset by robust NZ ag sector

PGG Wrightson sign on barn with shaggy beef cattle in Hawkes Bay. Photo by Lynn Grieveson

PGG Wrightson reaffirmed its forecast for annual earnings, saying weaker performance from its Australian and South American businesses would be offset by better trading in New Zealand.

Operating earnings before interest, tax, depreciation and amortisation is expected to be between $65 million to $70 million in the year ending June 30, up from $64.5 million last year and in line with its February forecast, the Christchurch-based company said today.

"Overall, the agricultural sector in New Zealand remains robust and is having a profitable year with solid production and good prices," chief executive Ian Glasson said in a statement. "PGW’s Australian and South American businesses have faced tough conditions, with both regions being too dry to meet their sales targets. Despite these headwinds we continue to expect an increase in overall operating ebitda for PGW this year, with PGW sharing in the broader prosperity in the NZ agriculture sector, highlighting the resilience of its diversified business model.”

In February, the company said 2018 net profit would be about 20 percent lower than last year's $46.3 million, due to one-time gains from property sales in 2017. Today, Glasson said net profit after tax from normal trading was forecast to be about 25 percent lower, reflecting the lack of significant property sales which added $8.7 million to earnings last year, an expected loss on currency hedges, and costs associated with potential Holidays Act remediation.

“The recent dip in the value of the New Zealand dollar means our export currency hedges are likely to mark-to-market as an unrealised loss,” Glasson said. “There are also non-trading items outside operating ebitda that have the potential to impact reported npat in FY2018. For example, as is the case with many large NZ employers, PGW is continuing to work through a process to quantify the cost of historical liabilities under the Holidays Act 2003."

Glasson said the recent Mycoplasma bovis outbreak in New Zealand is having little effect on the company's financial performance to date, and it is working closely with its customers to monitor the impact on the broader sector.

In October, Wrightson hired Credit Suisse (Australia) and First NZ Capital to run a strategic review of the business, looking at the firm's capital structure and shareholding structure and identifying the best route to pursue growth. Today, Glasson said the review was "progressing well" and the company hopes to comment further on outcomes from this work later in the year.

Its shares last traded at 70 cents, having increased 23 percent over the past year.