Cautious spending by the farming sector has seen rural supplier PGG-Wrightson post a revenue decline for first-half trading, but it remains "on track" to deliver earlier, full-year financial guidance.
Revenue for PGG declined 2.9% from last year’s $449.78million to $436.8million, earnings before interest, tax, depreciation and amortisation (ebitda) was down 16.7% to $26million and reported after-tax profit was down 0.5%, at $16million.
PGG chief executive Mark Dewdney said low dairy prices, reduced production of both dairy and red meat, tough wool trading conditions, and a wet start to spring led to cautious spending by farming customers, for the six months’ trading to December.
"These trading conditions led to a 2% decline in revenue.
"Despite this, net profit after tax remained broadly unchanged against the prior corresponding period," Mr Dewdney said.
PGG shares were unchanged at 54c following the announcement. Forsyth Barr broker Damian Foster said the "soft" results was below expectations, being down 17% on a year ago.
"The company cited continued weak spending from the dairy sector, affecting irrigation operations in particular," he said.
While revenue was down 2.5%, margin deterioration across the core New Zealand businesses, except the retail division, was integral to the weaker result. A limited dairy-related spend was touted as the core driver behind the weak result, despite a rebound in dairy farmer cash-flows.
"We expect this [dairy cash-flow] to be a tailwind supporting earnings growth in future periods," Mr Foster said.
Mr Dewdney said PGG benefited from its diversified business portfolio. For the half, its water and wool businesses had softer earnings than a year ago, while its New Zealand seeds business was back slightly. Other business units performed at, or better than last year, he said.
While there were some key trading months still ahead for PGG, Mr Dewdney said the company was "on track" to deliver earlier guidance of full-year operating ebitda in the $62million to $68million range.
Mr Dewdney expected full-year profit to be between $46million and $51million.
