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 company claims it has steered itself through what it describes as a “challenging year on many levels”.
“Like all businesses we have had to navigate managing Covid- 19 protocols, dealing with a high proportion of health-related staff absences, responding to supply chain challenges, and resourcing the business in an extremely tight labour market.”
PGW’s operating earnings before interest, taxes, depreciation, and amortisation (Ebitda) were $67.2 million in the 12 months ended June 30 compared with $56m in the 2021 year.
Chief executive Stephen Guerin told Rural News the result was a testament to the PGW team given the ongoing challenging environment.
He listed supply issues – both inward and outward – weather events around the country, the lockdown in the northern North Island in the second half of 2021 and labour shortages as some of the challenges the company faced during the year.
“The price of getting product here (into NZ) has got more expensive,” Guerin explained. “The price of getting a container out of the Asian market or American market used to be about US$3,000 a container and now that is nearer to US$21,000.”
He says logistical issues are continuing to impact on the business, with some spring crop product that is supposed to be in the country still stuck in Malaysia.
“It is not going to get here in time, so we are going to have to fly product in and that adds cost.”
He says the company is carrying more inventory to ensure it has product on hand for customers.
“At the end of June, bearing in mind June is the low point of our inventory cycle, we had $20 million more of inventory on hand.”
Despite these challenges, PGW’s net profit was $24.3m, up $1.6m or 7% and revenue lifted 12% to $952.7m. It declared a final dividend of 16 cents per share to be paid Oct 3. The full year dividend of 30 cents/ share is up from 28 cents in 2021.
Guerin says PGW’s real estate business had also enjoyed a successful year – despite total sales being down in this area.
“Whilst returns in the residential and lifestyle channels have been challenging, sale volumes of rural properties have been strong.”
Guerin says the company expected continued solid performances in its rural real estate with favourable spring appraisals.
PGW’s retail and water business reported an operating Ebitda of $52.5m, up $15m on the 2021 year. A big positive was the Fruitfed business, which was flourishing on the back of a very strong horticulture sector.
However, PGW’s agency group – which incorporates the livestock, wool and real estate business – posted an operating Ebitda of $21.8m – down $3.3m.
Guerin conceded much of this drop was in its strong wool business, as this sector is continuing to struggle.
PGW believes a profitable outlook for most of the NZ agri sector looks likely to continue through the remainder of 2022 and into the year ahead.
“However, inflationary pressures on input costs will likely translate into reduced on-farm profits, and exporters will still need to navigate high shipping costs and challenging logistics."
Wool Changes?
Stephen Guerin says PGW is committed to wool and has hinted that the company is looking at ways of do things differently in this space.
“We are looking at doing things differently and we’ve had some teams offshore recently talking to overseas suppliers in this space,” he told Rural News. “But nothing to announce at the moment.”
He says the company makes money out of its wool business but really struggles in the crossbred and strong wool market.
“It (strong wool business) is becoming tougher and tougher. But we are committed to it and we are open to doing things differently.”
Guerin says wool is part of PGW’s heritage as its services people on sheep farms every day.
“We are investing in the infrastructure of our wool business and we will continue to do this. We are not getting out of wool.”
