PGW revises earnings guidance as farmer spending drops
Rural trader PGG Wrightson has revised its operating earnings guidance, saying trading conditions have deteriorated since the last market update in February.
Highlights of the results for the six months to December 31 2022, include operating EBITDA (earnings before interest, taxes, depreciation and amortisation) of $47.8 million (up $0.4 million or 0.9%) and revenue of $585.8 million (up $33.4 million or 6.0%) – but net profit after tax of $21.2 million (down $1.3 million or 6.0%).
As a result, PGW has revised its operating EBITDA guidance for the full financial year to June 30, to $57 million, down from $62 million.
Nevertheless, the company has announced an interim dividend of 12 cents per share, to be paid on April 4.
In a statement releasing the figures on February 21, PGW Chair Joo Hai Lee said the result included new revenue and earnings highs for the Retail and Water Group, which generates the majority of its earnings in the first half of the financial year.
“This was partially offset by challenges in our Agency business, in particular our Real Estate business. The overall trading performance reflects the healthy state of the Group and demonstrates the value that our customers see in the technical expertise of our people and PGW’s full service offering.
“It is pleasing to see results that reinforce we are strategically on the right track as a business and are perceived as the ‘Leaders in the field’ in the sector,” Lee said.
Chief executive Stephen Guerin told Rural News the profit was affected by increased operating costs including wages and interest.
The regulatory regime facing the dairy industry in particular had impacted rural real estate, he said.
“We sold several sheep and beef properties but there’s been a lack of interest in dairy properties, lifestyle and rural residential spaces,” Guerin told Rural News. “They have fallen quite dramatically.”
Lee said New Zealand’s farmers and growers are facing a range of uncertainties and farmer confidence is low.
“Our clients are experiencing an environment with rising interest rates, tightening credit, increased input costs, labour shortages, supply chain disruption, an uncertain geopolitical and domestic regulatory landscape, and adverse weather events including the extraordinary impacts of Cyclone Gabrielle.”
However, PGW still saw positive fundamentals in the medium to longer-term.
“The primary sector has performed well and the PGW board is pleased with how PGW has traded. There is strength in the diversity of the PGW’s portfolio of businesses and the way the business is executing on its strategy.”
Cyclone Gabrielle
Guerin says the impact of Cyclone Gabrielle remains a developing situation. Speaking more than a week after the peak of the storm, Guerin said some Hawkes Bay horticulture crop losses seemed not as bad as first thought “but it is still early days.”
Some PGW customers were completely decimated, he told Rural News. “We’ve seen photos of some orchards where there’s not a tree standing, so it’s a case-by-case basis.”
There were also animal health issues emerging, with reports coming out of MPI of footrot and lice because of the hot humid conditions. Getting the water and silt away was still a priority.
“Trees and vines don’t like standing water and they need oxygen so that’s a real focus.”
Guerin says PGW team members were in the field helping move silt and debris. The company had also made donations to the Rural Support Trust and volunteers were working with St Johns and Search and Rescue.
