PGG Wrightson’s (PGW) CEO, Mark Dewdney, announced today that PGW is forecasting that its full-year operating EBITDA for 2016, including earnings of associates, is expected to be in the $61 to $67 million range.
“While the recent bounce in global dairy prices provides welcome relief for the sector, our view is that this news has come a little late for New Zealand dairy farmers to materially increase their spending with us for the current season. A low dairy payout forecast at the time farm budgets were set remains the key reason we believe our earnings may dip in 2016 from last year’s excellent result. Although dairy is a significant part of the overall story, you need to look at the wider agri-sector to get a more comprehensive view on things. For example, confidence remains high in beef, horticulture and viticulture, sectors where PGW is very strongly represented. Furthermore, continued improvements within PGW’s business will help support earnings in 2016 and continue to drive growth into the future.
“With the first quarter of the financial year behind us, I’m pleased to say we are tracking slightly ahead of where we thought we would be. In particular, NZ Seeds has had a strong start to the year.”
Chairman, Alan Lai, commented that the improvements to PGW extend deeper than the earnings growth shareholders have seen in recent years. “We have every faith that the business is on the right path. The board is confident that our strategy has the business focused on the right areas and believes that it achieves the correct balance between operational execution, continuous improvement and growth.”
Twelve months after introducing shareholders to the group strategy based around the three themes of improve, grow and game changers, Dewdney reflected on some of the achievements over 2015. “All our businesses have embraced the ‘improve’ theme of our strategy and have continued to develop ways to make it easier for customers to do business with us and to more easily deal with multiple parts of our business. We call this ‘One-PGW’. We have also completed several significant IT projects, such as the rollout of tablets across our retail field teams and livestock representatives. These mobility solutions and improvements to our IT infrastructure create a platform to use technology to further enhance our customer experience.
“Within the ‘grow’ theme of our strategy we are continuing to gain traction with dairy clients and our water business in implementing improvements to systems and processes that we believe will see it emerge as the leader in that market. Perhaps the most noteworthy achievement in the implementation of our strategy recently has been in our South American operations. Construction of the new logistics centre in Montevideo is at an advanced stage and we expect that it will be commissioned this calendar year. This provides our Seeds business in Uruguay with the infrastructure it needs to take its operations and business to the next level and ultimately increase sales. We also announced in July this year that we have acquired fifty per cent of one of our key strategic partners in the region, Agrocentro Uruguay. This acquisition touches on both the ‘grow’ and ‘game changer’ elements of our strategy. While it provides a clear growth opportunity, perhaps even more importantly, Agrocentro’s foothold in rural retail complements our existing operations and replicates the business model we have in NZ.”
To summarise Dewdney noted that “2015 was an excellent year for PGW. The business managed to grow its earnings despite softening market conditions and this is a strong indicator that we are on the right track”.