Wrightson lifts earnings forecast on strong retail, sees tough 2017

PGG Wrightson [NZX: PGW] raised its earnings guidance, saying its retail unit is likely to beat last year's record result, although the rural services firm expects 2017 to be tough.

Earnings before interest, tax, depreciation and amortisation are expected to be between $65-68 million in the year ending June 30, up from a previous forecast for ebitda of $61-67 million, the Christchurch-based company said in a statement. That's still down from $69.6 million a year earlier due to the slump in dairy prices eroding farmers' incomes.

Wrightson said its retail unit will beat last year's record operating ebitda with horticulture and beef sectors making up for the dairy downturn, while its seed and grain business will deliver higher earnings as its Australasian customers offset weaker South American results. Wrightson had warned that flooding in Uruguay posed a risk to earnings but has downgraded its assessment of the threat.

"At the group level, our operating ebitda for the year to June 30, 2016, will reflect two opposing forces," chief executive Mark Dewdney said. "On the one hand tougher market conditions, particularly in the New Zealand dairy sector and in South America; on the other, the hard work we are putting into improving and developing PGW continues to pay off and we are benefiting from our market position in the agri-sectors that have been performing strongly."

Mr Dewdney said he expects the 2017 year will remain challenging, with dairy farmers facing their third consecutive unprofitable season and the lingering uncertainty as to how quickly Uruguay will recover from the recent floods.

"Despite these challenges, we believe we can still continue to build market share and margins in many of the sectors in which we operate," he said.

The company expects to report its final result on August 9.

Wrightson shares last traded at 38c and have declined 8.4%  so far this year. The stock is rated an average 'hold' based on three analyst recommendations compiled by Reuters, with a median price target of 43c.

(BusinessDesk)