PGG Wrightson unveils, rare, profits upgrade

PGG Wrightson, the New Zealand agribusiness icon, broke with its patchy recent history by unveiling a profits upgrade, boosted by a strong performance by its cattle trading business.

The farm retail and trading group, controlled by China-based seeds group Agria Corp, lifted to NZ$56m-58m, from NZ$52m-56m, its forecast for earnings before interest, taxation, depreciation and amortisation (ebitda) for the year to the end of June.

The upgrade, while small, contrasted with the group's troubled performance since 2009, since when, amid a battle to lower its debts, it has unveiled only two years in profit.

And these profits, of a combined NZ$41m, were dwarfed by the loss of NZ$305m reported for last year, down to a writedown of goodwill from the group's formation in 2005 from a tie-up of Wrightson and Pyne Gould Guiness.

Livestock season closes on a high

However, the group's trading performance "has held up rather well" since January, said Mark Dewdney, appointed chief executive  in July, a resilience which defied "some localised challenges".

"The upper North Island saw another summer drought develop with farmers looking for rains to come mid-April," Mr Dewdney said.

"Just as this happened, we also experienced a tough spell in the South with very wet and cold weather conditions challenging arable production and winter sowing activities."

However, earnings were boosted by a strong close to New Zealand's livestock and dairy season last month, which meant the closure of forward herd sales contracts and, and brought the PGG Wrightson livestock business a record month.

"Driving this was the large quantum of dairy forward sales transacted in May, along with the increasing values in sheep and beef, and higher-than-forecasted auction cattle volumes yarded."

Property purchase

The improvements at PGG Wrightson were underlined by the group's decision to repurchase for NZ$30m a portfolio of properties sold, under a leaseback agreement, by the group shortly after the 2005 merger.

"The decision to sell the properties was made at a different point in time, and the company now has a completely different look to its balance sheet," Mr Dewdney said.

The purchase of the 40 properties, including retail stores, seed processing sites and livestock saleyards "across New Zealand" offers PGG Wrightson "the opportunity to re-shape our property portfolio," he added.

The group is to undertake a strategic review of its "property needs", which may see some of the repurchased assets sold-off.

Shares in Agria, which are listed in New York, rose 3.8% to $1.38 in morning deals.

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