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PGG Wrightson warns of earnings fall

NZ Newswire logoNZ Newswire 17/10/2016 Tina Morrison

PGG Wrightson expects operating earnings to decline this year, snapping three years of growth, amid weakness in some of the key agricultural commodity markets it has exposure to.

Operating earnings before interest, tax, depreciation and amortisation are expected to be between $62 million and $68m in the year to June 30, 2017, down from $70.2m the year earlier, the Christchurch-based company said in a presentation prepared for its annual meeting on Tuesday.

Net profit after tax is expected to be broadly in line with the 2016 financial year of $39.6m, it said.

Earnings at the rural services firm are closely aligned to the fortunes of the rural sector, where farmers rein in spending during periods of low commodity prices.

Confidence in the dairy sector remains a headwind this year and dairy farmers receiving a higher milk payout are likely to prioritise debt reduction, wool trading volumes are down due to lower international prices and reduced Chinese demand, and international prices for red meat have weakened, the company said today.

Meanwhile, its South American operations continue to be impacted by flooding in Uruguay earlier this year.

"While it remains early in the 2017 financial year, we have observed that the trading environment for agricultural inputs and services has become marginally more difficult in New Zealand," chief executive Mark Dewdney said.

"Additionally, we note the full effect of the flooding experienced earlier this year in South America still remains to be seen. For these reasons, we believe that 2017 will be a tougher trading environment than 2016.

PGG Wrightson shares fell 1.9 per cent to 52 cents. The stock has gained 28 per cent this year.

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