Meat prices bode well for PGG Wrightson turnover

The beef sector is likely to help PGG Wrightson overcome lower forecast dairy prices. Photo by...
The beef sector is likely to help PGG Wrightson overcome lower forecast dairy prices. Photo by Stephen Jaquiery.
PGG Wrightson's trading performance is ''holding up well'' despite lower forecast milk prices, chief executive Mark Dewdney says.

The rural services company was on track to better last year's operating earnings before interest, tax, depreciation and amortisation of $58.7 million in the year to June, Mr Dewdney said in a statement yesterday.

Confidence remained high in the sheep and beef sectors and that strength should see the business well placed if it encountered reduced dairy-related spending over the remainder of the financial year, he said.

Fonterra has cut its farmgate milk price for 2014-15 from $5.30 to $4.70. Dairy farmers have been urged to watch their spending.

PGW's first-half results, expected to be announced in late February, would be strong compared with the corresponding period last year which was very pleasing, Mr Dewdney said.

''Revenue in our retail segment is weighted towards the first half of the year and has performed well. We believe that market share gains have contributed to this revenue growth we have seen in our retail business,'' he said.

New Zealand Seeds was another business unit that had performed well on the back of a strong spring season.

There remained some uncertainty with respect to the second half of the financial year, with some signs of market softness in areas related to dairy starting to be seen, Mr Dewdney said.

Rabobank's latest dairy quarterly said the milk price would result in many New Zealand dairy farmers operating at a cash loss for the year.

However, most were starting from a solid financial position and had been minimising expenditure wherever possible.

The cash-flow crunch would arrive in mid-2015 when retrospective milk payments would be minimal and expenditure was required for the new 2015-16 season, but financiers were likely to support working capital requirements through that period, the report said.

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