Strong Milk Price Boosts PGG Wrightson Earnings
Strong farmgate milk price is helping boost investment on farms, says PGG Wrightson chief executive Stephen Guerin.
Acting chair, U Kean Seng notes that there is a significant degree of volatility in the global economy and international markets currently.
“The effects of New Zealand’s monetary policy are also being felt with inflation levels beginning to trend lower but with elevated interest rates raising borrowing costs,” he says.
PGW is forecasting earnings before interest, taxes, depreciation, and amortisation (EBITDA) result for the year to June 30 2024 of around $52 million.
“As noted earlier, while the medium to long-term sector fundamentals remain strong, our short-term operating EBITDA is expected to be back from last year’s strong operating EBITDA result of $61.2 million based upon our current assessment of a more challenging operating environment,” says Seng.
“However, it is early in our financial year, and we will be in a better position to assess the full year forecast again after the spring trading period.”
Seng says while some parts of the rural sector are recovering from last summer’s cyclones there is also concern about the potential for drought conditions in the coming months due to El Niño weather patterns.
Demand in key export markets has declined and China’s economic recovery remains subdued. These factors combine to hamper confidence and reinforce cautiousness as farmers and growers anticipate the impacts on the profitability of their business operations.
Although the sector faces a challenging year, this is nevertheless balanced by strong medium to longer-term fundamentals.
“We expect to see improvement as the economies of our key export markets recover. The global population and demand for protein is projected to show continued growth and the fundamentals for the agri-sector remain sound,” he says.
The Ministry for Primary Industries is projecting steady growth for New Zealand’s primary exports with annual revenue expected to reach $62 billion by 2027. As a market leader in the agricultural sector, PGW is in a strong position operationally to support our clients grow their businesses as they respond to this uptick in demand, Seng points out.
