PGG Wrightson has recorded
a net loss after tax of $30.7 million for the year ended June
- a year which the rural services company has described as
While the livestock and rural supplies businesses performed
well and benefited from improved returns at the farm gate,
the group results reflected the impact of an extreme wet
spring and summer in Australia, the Canterbury earthquakes
and restructuring costs, chairman Sir John Anderson said.
While Sir John said the company could take "a number of
positives out of the performance", Craigs Investment Partners
broker Chris Timms described it as an "ugly" result and
probably worse than he expected.
It could reflect the influence of the company's new managing
director, George Gould, appointed in February, wanting to
"clear the decks", Mr Timms said.
Earnings before interest, tax, depreciation and amortisation
(ebitda) was $49.4 million (down from $57.2 million for
theprevious corresponding period) from operating revenue of
$1.2 billion (up from $1.1 billion).
PGG Wrightson Finance - which is being purchased by Heartland
New Zealand - was excluded from the results.
Factoring in the revaluation of the company's wool interests
and supply contract provisions with Silver Fern Farms and
other one-off and fair value adjustments totalling $47
million, resulted in the $30.7 million loss, ($23.3 million
profit a year earlier).
In 2009, the company entered into a 10-year supply contract
for livestock to Silver Fern Farms. To the extent that the
company was unable to meet the annual agreed level of supply,
in certain circumstances it was required to make a payment to
SFF related to the shortfall.
Due to the level of supply and current livestock market
trends, a provision of about $9.6 million had been made,
representing the best estimate of PGGW's expected liability
for shortfall payments over the remaining contract term.
In the past 12 months, PGGW sold its stake in New Zealand
Farming Systems Uruguay (NZFSU) and New ZealandMerino.
The settlement of NZFSU's performance and management fees and
internalisation of its management agreement saw parent bank
debt reduced to $124.5 million, down from $177.9 million for
The results reflected a company that had taken stock of its
position and moved on, not just operationally, but also in
the form of one-off writedowns and divesting from businesses
such as finance and merino where an ownership position was no
longer a prerequisite, Mr Gould said.
The company was refocusing on "getting the basics right" and,
while conscious of volatility in the wake of the emerging
global fiscal crisis, it was planning for improved earnings
for the coming financial year.
It was awake to the potential opportunities afforded by
expanding its seeds business in core southern hemisphere
markets such as Australia and Brazil, and in growth
agricultural economies such as China, Mr Gould said.
It had obviously been a hard year for PGGW, with the company
experiencing several issues which it had outlined, Mr Timms
A lot of people would question the result, given how it had
been such a good year for sheep and beef farmers and the
dairy pay-out was up.
The supply contract with Silver Fern Farms was interesting,
with Mr Timms questioning how that would be resolved.
Positive features included the reduction in bank debt and the
balance sheet was in a stronger position than it had been.