PGG Wrightson reports earnings rise, profit drop

PGG Wrightson [NZX:PGW] has lifted its operating earnings $8.2 million in the last half-year.

Before interest, tax, depreciation and amortisation, they were $34.2 million, up $8.2 million on the previous half-year, $26.0 million.

However, the company reported net profit after tax was $14.6 million, $0.4 million lower than the same period last year.

The profit drop is attributed to movement in the New Zealand dollar, and a reduction in gains on property sales after the completion of a divestment programme.

The company expected that net profit after tax (NPAT) for the 2018 financial year would be approximately 30% lower than the 2017 financial year. But with a stronger trading performance than predicted, it now expects NPAT to be approximately 20% lower.

The PGG Wrightson board declared an interim dividend of 1.75 cents a share, which will be paid to shareholders registered at the record date of March 16, 2018. The dividend will be fully imputed and paid to shareholders on April 5, 2018.

PGW chief executive Ian Glasson says the livestock business benefited from strong international demand for protein and reduced tallies, which combined to push up livestock prices across New Zealand.

The company also saw improved performance in its wool procurement and brokering businesses despite reduced demand for global crossbred wool.

Net cash outflows from operating activities were $49.8 million, up from $16.2 million in the same period last year.

Receivables increased largely from its Go range of livestock products and the weather-driven seasonal delay in planting, which pushed its seasonal peak in working capital closer to December than usual.

The company expects year-end debt levels in June to be approximately $30 million higher than June 2017 due to increased working capital across seed and grain, retail and water, and Go livestock receivables.

“Much of the growth in debt over the last two years can be attributed to our working capital investment in Go product receivables that are proving to be popular for both our clients and profitable for the company.

“If you exclude the effect of Go products from our net interest-bearing debt you will see that our debt as at December 2017 is within a few million dollars of our debt levels as at December 2015,” Mr Glasson says. 

Strategic review
Last October the PGG Wrightson board made a joint appointment of Credit Suisse (Australia) Ltd and First NZ Capital Ltd as financial advisers to assist with a strategic review of PGW’s business, its growth opportunities, capital and balance sheet requirements, and potentially shareholding structure.

PGW Chairman Alan Lai says the review is continuing "and it is hoped that the company will be in a position to comment further on outcomes from this work later in the year.”

Mr Glasson says the company expects 2018 financial year operating ebitda to be in the $65-70 million range.

“As PGW enters the second half of the financial year, we do so with confidence.

“We remain optimistic the positive trading environment will continue through the second half of the year in New Zealand, but as always, across all markets, we wait to see what autumn conditions will bring and how these will impact our business as we move into the key planting and harvesting periods.”

PGW shares last traded at 61c, rising 12.96% in the past year.