Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Wynnstay shares drop as growing farmer gloom bites

Twitter Linkedin

Wynnstay Group shares tumbled as the UK grain trading-to-pets group warned that its outlook has "become more cautious", as weak grain prices and a mild start to winter curb sales to farmers.

Wynnstay shares - which in mid-December touched a 17-month high of 610p – stood at 495p in early deals in London on Wednesday, a drop of 5.3% on the day, and an eight-month low.

The drop followed the release of a results statement which, while showing increased operating profits in both its agriculture and specialist retail divisions, flagged the dent to prospects both from weak crop prices and mild weather, which has cut the need for farmers to buy-in feed.

"In light of continuing low farmgate prices and subdued farmer sentiment, our view of the outlook for the new financial year ahead [ending in October] has become more cautious," said Ken Greetham, the Wynnstay chief executive.

Jim McCarthy, the group's chairman, said that "farmgate prices still show little sign of the expected recovery and continue to impact farmer income.

"While it is still early in our calendar, a cautious view of the year ahead is appropriate since a continuation of these conditions will impact the group's performance."

'Crop prices below production costs'

Indeed, Wynnstay, besides noting that its own margins had remained "under pressure" in agriculture in its latest financial year, highlighted the hardship facing farmers.

"Farmgate prices remain a challenge for the industry, with prices below the realistic cost of production for many farmers," Mr Greetham said.

A triple whammy of "high levels of world food stocks, tempered demand in developing countries and fluctuating international currencies delaying a return to acceptable pricing".

These conditions mean "that our farmer customers will face ongoing challenges which will require further efficiencies throughout the agricultural industry".

Profits rise

The group itself achieved a rise of 8.7% to £4.13m in operating profits in agriculture for the year to the end of October, helped by strong feed demand early in the year, and with the weaker crop prices cutting its raw material costs.

The weaker commodity, and fertilizer, prices were also evident in a drop in agriculture revenues of 13% to £270.1m for the year.

Group earnings fell by 0.4% to £6.67m, on revenues down 18.5% at £377.4m.

Market reaction

Analysts at broker VSA Capital said that the group had "delivered a resilient performance despite continued tough market conditions for its customers", but highlighted the prospect of "tougher" conditions ahead.

Shore Capital, flagging a "challenging short-term outlook" for Wynnstay, cut its forecast for the group's pre-tax profits in the year to October 2016 by £1.5m, equating to an 18% drop in earnings per share.

"Whilst we believe Wynnstay is well placed to cope with challenging market conditions, it is unlikely to be immune," Shore Capital analyst Phil Carroll said.

"As resilient as Wynnstay has proven itself to be historically, we believe the prolonged period of subdued output prices for UK farmers is showing no signs of recovery and is now resulting in more cautious behaviour."

"Sentiment in Wynnstay's farming customer base has become increasingly negative as the low prices for farming outputs continue to put pressure on the profitability of farms."

Wynnstay shares recovered some ground to stand at 505p in mid-morning deals, a drop of 3.8% on the day.


Twitter Linkedin
Related Stories

Festive staff shortages 'likely' as British growers cut ties with UK supermarkets

Faced with mounting concerns over labour shortages and fears they may not be able to fulfil retailer contracts, some British growers have sought to cut ties with UK supermarkets in favour of companies elsewhere in Europe.

Hard Brexit to have 'catastrophic' effect on European meat industry; new report

A hard Brexit will have a ‘catastrophic impact’ on the European meat industry, according to a report published by Europe’s meat industry body, UECBV, as the UK and EU continue negotiations.

Manufacturers stockpile agrochemicals in bid to keep post-Brexit prices down for farmers

Manufacturers of crop protection products are stockpiling agrochemicals in warehouses in a bid to keep input costs down for farmers after Brexit, according to the chief executive of the Crop Protection Association, Sarah Mukherjee.

Dairy groups sidestep shockwaves from GDT price slump

Indeed, shares in the likes of A2 and Beston soar. Still, that does not mean there are no losers from the dairy price falls...
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069