Positive signals but challenges remain
PGG Wrightson (PGW) chief executive Stephen Guerin says that while there are positive signals within the market, there are also challenges.
The second half of 2023 gave rural retailer PGG Wrightson a challenging result, but there’s still room for positivity on the horizon, according to chief executive Stephen Guerin.
The company released its half-year results last week, marking yet another softening in profit and revenue. Operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) was $36.6 million, down 24%, and its net profit after tax (NPAT) slumped 40% to $12.7 million. Also down was the company’s revenue, at $560.9 million.
Guerin says that the results are a reflection of the ongoing pressures felt by those on-farm.
“It’s been a tough environment and, in that context, we’ve produced a result that’s softer than in prior years, but having said that, our team have worked hard and I think they’ve done well in the context of what’s going on in the market,” Guerin told Dairy News.
He says one of the biggest factors in this softer result are softer commodity returns across all parts of the primary sector.
“If we look across the sector… there’s been a bit of positive news in the dairy sector but that’s only been in recent times, all sectors are showing returns to customers below or at the cost of function,” Guerin says.
Also impacting the company is the flow-on effects of Cyclone Gabrielle for many of its North Island customers.
The storm hit New Zealand in February 2023 and Guerin says many of the retailer’s customers across the North Island are still focused on “recovery and remediation of properties”.
“That has cashflow impacts for them,” he explains.
Guerin says the third factor is the cost of funding operations. He says that high interest rates, plus the taking on of additional debt due to the impacts of the cyclone and lower commodity returns have meant farmers are taking on more costs.
However, there have still been some highlights for the company.
“For us, we’re pleased about our improvements around our cashflow. We are still seeing customers paying their bills… and our market shares still continue to increase in our retail business,” Guerin says.
“So, they tell you we’re doing something right for the customer.”
“Of course, that doesn’t always flow through to the bottom line,” he adds.
Looking to the future, PGG Wrightson has softened its forecast from $52 million to approximately $50 million, so Guerin says that the next six months.
He says retail is likely to have a better six months than the previous half-year, and there is some optimism for the dairy and wool sectors and likely some stability for the red meat sector.
However, the real estate business looks to be challenged, says Guerin. He says this is the bi-product of higher interest rates and lower farmer confidence.
“There is some interest out there, but interest is not sales,” he says.
“If we think in the medium-to-long term, we are more confident in that space because of the improving commodities and good harvests,” Guerin concludes.
Trade and Agriculture Minister Todd McClay says New Zealand's trade interests are best served in a world where trade flows freely.
New Zealand's red meat sector says it is disappointed by the United States' decision to impose tariffs on New Zealand exports.
OPINION: Farmers nationwide will be rubbing their hands with glee at the latest news from the Government about the RMA reforms.
Holstein Friesian NZ and Link Livestock have agreed on a strategic partnership to provide HFNZ members with comprehensive services from one of New Zealand's most respected dairy men.
Rural retailer Farmlands has launched a new casual clothing range available across 42 stores nationwide and through its online store.
Federated Farmers says the health and safety changes announced this week by the Government represent the start of overdue reforms.
OPINION: Is it the beginning of the end for Greenpeace?
OPINION: The good times felt across the dairy sector weren't lost at last week's Beef + Lamb NZ annual meeting.