PGG Wrightson profit growth stalls in first half

PGG Wrightson's profit growth stalled in the first half, which the rural services company blamed on low prices for dairy and wool and reduced production of red meat which had made farmers more cautious about spending.

Profit fell to $15.99 million in the six months ended December 31, from $16.07 million a year earlier, the Christchurch-based company said in a statement. Sales declined to $608 million from $623 million.

Sales and earnings fell at both the rural services and the smaller seed & grain division in the first half but the company said it was more upbeat for the second half of the year, reiterating its guidance for full-year operating earnings before interest, tax, depreciation and amortisation of $62 million to $68 million while raising its forecast for net profit to reflect anticipated one-time gains such as from property sales. Flat earnings are an improvement on the year-earlier result, when profit fell 19%.

"Low dairy prices, reduced production of both dairy and red meat, tough wool trading conditions, and a wet start to spring led to cautious spending from New Zealand's farming customers during the six months to December 31, 2016," chief executive Mark Dewdney said. Trading conditions were expected to improve in the second half "and the early indications for our 2018 financial year are looking encouraging."

The company will pay an unchanged interim dividend of 1.75c a share on April 4, with a record date of March 10.

First-half revenue from rural services declined to $437 million from $499.8 million and operating ebitda dropped to $29 million from $32.8 million. Within the rural services division, retail revenue rose 4% to $318.9 million and ebitda gained 8% to $26.8 million while livestock revenue fell 11% to $27 million and earnings slipped 0.8% to $2.6 million.

Wrightson is 50.2% owned by Agria Corp, which traded on the New York Stock Exchange until being suspended last November and delisted on January 2. Wrightson's chairman Guanglin "Alan" Lai, who is also executive chairman of Agria had made a takeover offer for Agria last January but withdrew the offer in April.

Wrightson shares last traded at 54c and have gained 29% in the past 12 months, outpacing the S&P/NZX 50 Index's 16% gain.

(BusinessDesk)