PGG Wrightson sustains momentum

PGG WrightsonPGG Wrightson (PGW) announced its third straight year of earnings growth, with an 18 per cent uplift in operating EBITDA.

The improved results owed much to improvements in PGW’s three largest businesses of retail, livestock and seed and grain.

Retail grew sales and lifted margins to achieve a $2.6 million increase in operating profit. “This improvement was led by our core agronomy categories, where our technical expertise is strong,” said PGW CEO, Mark Dewdney.

For the year ending June 30, PGW achieved operating earnings before interest, tax, depreciation and amortisation (operating EBITDA excluding earnings of associates) of $69.5 million, up from $58.7 million for the prior financial year. The company also announced that it will pay a fully imputed dividend of two cents per share, which will be paid on October 1. This will bring the total fully imputed dividends paid for the year to four cents per share.

“This is a very strong result given challenges facing some sectors of New Zealand agriculture over much of the year. PGW is not immune to the challenges being experienced in some sectors, but the diversified portfolio of our agriculture business offers a degree of protection from cyclical volatility in any individual sector. This is demonstrated by recently released Statistics NZ data that show dairy exports declining 24 per cent in the same period that the value of fruit exports reached an all-time high, up almost 20 per cent from a year earlier,” said Dewdney.

“Just as importantly, the improvements in operating performance that we are delivering continue to boost the bottomline and sustain the momentum PGW has generated in recent years.

“Challenging market conditions in the dairy sector have resulted in reduced demand for some of our lower margin activity such as grain, fertilizer and supplementary feed, and this partly explains the flat revenue year on year. Despite the dairy sector challenge in the second half, most of our individual business unit financial results have improved. These results come through a combination of PGW having a clear strategic focus, highly engaged and stable staff, and the strongest product portfolio in the market backed by deep technical expertise and a constant focus on building extremely close relationships with our customers.”

The increase in operating EBITDA contributed to a net profit after tax of $32.8 million. “This is lower than last year,” Dewdney explained, “because last year’s number benefited from a low effective tax rate and a number of non-operating gains that weren’t repeatable, such as the gain on sale of our investment in 4Seasons Feeds Limited”.

Regarding the larger business units, operating EBITDA, excluding earnings of associates for retail, increased seven per cent, livestock increased 15 per cent and seed and grain increased 19 per cent year on year.

Chairman, Alan Lai said “The board and I are very pleased with the financial result, and also with the progress PGW has made on delivering its One PGW strategy. Important milestones such as the recently announced investment in Agrocentro Uruguay and Grainland in Australia are strengthening our future growth potential.”

“The headwinds facing the dairy sector made increasing this result in the 2016 financial year a genuine stretch target. Further improvements will be made within the business and we will continue to look for new growth opportunities. Given the current volatility in a number of markets, and the need to assess the likely impact of this on PGW’s clients, it is the company’s intention to defer providing a forecast for the current fiscal year until the annual shareholders meeting in October,” concluded Dewdney.

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