Wrightson warns wet autumn will weigh on annual earnings

PGG Wrightson, whose chief executive yesterday signalled his departure at the end of the year, warned a wet autumn sapped the performance of its seed and grain business and will weigh on annual earnings.

The Christchurch-based company said it expects operating earnings before interest, tax, depreciation and amortisation to be in the bottom half of its earlier guidance for earnings of between $62 million and $68 million, while net profit will be near the low end of its previous forecast for between $46 million and $51 million. The rural services firm reported ebitda of $70.2 million in the year ended June 30, 2016, for a net profit of $39.6 million.

Wrightson profit stalled in the first half as low prices for dairy and wool and reduced red meat production made farmers more cautious about spending, but the company had been more upbeat about the second half.

Wrightson had been tracking ahead of forecast before autumn, but the wet month of April made crops difficult to harvest and paddocks challenging to work, which has weighed most heavily on the seed and grain division.

"For our grain business, lower harvest yields have reduced earnings from our processing and drying facilities," chief executive Mark Dewdney said in a statement. "For seed, autumn demand for our seed products has been less than expected as many farmers have simply been unable to complete their re-grassing and autumn pasture renewal plans."

Dewdney yesterday announced his looming exit from the company at the end of the year "to pursue private interests" after doing an "excellent job" in building staff engagement and targeting growth in certain areas of the business.

Wrightson's livestock business was benefiting from strong international demand for protein and low livestock numbers, and Dewdney today said the agricultural sector's increased confidence bode well for the 2018 financial year.

"Our 2016 earnings were a record and we are hoping that FY18 will be close to that again," he said.

The company's shares closed at 60 cents yesterday, and have gained 69 percent over the past 12 months.

(BusinessDesk)