Rural services company PGG Wrightson has increased its full-year operating profit guidance despite challenging conditions in the farming sector.
Yesterday, chief executive Mark Dewdney said PGW expected its full year operating profit to be in the $65 million to $68 million range, up from the previous guidance of $61 million to $67 million indicated in April.
New Zealand earnings continued to exceed expectations with strong autumn sales underpinning the performance, Mr Dewdney said.
It was now expected the company's retail business would improve on last year's record operating profit and that would be a "fantastic achievement'' given the cautious spending from dairy clients over the year.
PGW expected to announce its full year's results on August 9.
Livestock had also outperformed expectations although a small drop in earnings was expected due to lower volumes of dairy herd sales.
The earnings of the company's other rural services business units should generally be in line with the previous year, with the exception of water.
Reduced demand for new pivot irrigation installations would lower water's contribution to group earnings.
In April, PGW signalled flooding in Uruguay and the region would affect demand and earnings for its South American business.
It now expected the impact on this year's result would be slightly less than anticipated.
However, the company's caution remained in respect to the extent of longer-term effects on farmer confidence in the region.
While soybean prices had risen in response to crop damage, it was too early to tell whether that increase was enough to restore farm revenues and spending to pre-flood levels.
Market conditions were expected to remain challenging over the company's 2017 financial year, Mr Dewdney said.
The dairy sector would remain tough.
Many dairy farmers were facing their third consecutive unprofitable season and it remained uncertain how quickly Uruguay would recover from weather-related events.
Despite those challenges, the company believed it could continue to grow market share and margins in many of the sectors in which it operated, he said.
