PGGW meets profit expectations

To regain their own profitability, farmers need a strong and efficent rural serving sector, and it's good to see earnings are up to expectations by leading provider PGGWrightson.

After some costly decisions over the last year with the NZFSU investment, the failed merger with SFF, and a need to reduce debt, no more surprises were needed.

New experienced leadership under Sir John Anderson should help this company consolidate its position, and allow it to help drive agriculture back to sustainable profitability.

Rural services firm PGG Wrightson (PGW) today reported net profit of $23.3 million for the year ended 30 June 2010, in line with forecast and analysts' expectations. PGW in the fiscal year to June 30, 2009 had a $66.4m loss, caused by one-off costs of $49.6m from the failed merger with Silver Fern Farms and a $39.2m fall in the value of its stake in New Zealand Farming Systems Uruguay (NZFSU).

The Christchurch headquartered company reported earnings before interest, tax, depreciation and amortisation of NZ$70.5m down from NZ$81.1m in 2009.

Excluding the Government's recent tax changes to building depreciation of $2.0m, underlying net profit after tax for fiscal 2010 was $25.3m.

For the year to June 2011 the board expected trading performance to be largely in line with the prior reporting period with some upside at the net profit level taking into account reduced interest costs.

Chairman Sir John Anderson said the results reflected tight liquidity on farm and with it a reduced appetite for expenditure on agricultural inputs as well as intensifying competition in core markets.

PGGW undertook a recapitalisation in November 2009, with Chinese-based firm Agria taking a 19 per cent stake.

The company has also announced a new two core-division structure. Anderson said the recapitalisation and securing of Agria as a cornerstone shareholder enabled PGW to retire $207m of debt.