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.
The result comes on the back of strong primary commodity prices and while Covid and lockdowns impacted its livestock business, all-time high revenues in retail and water business boosted the company's profits.
Total revenue for the half year ending December 2021 reached $552 million, 11% above the previous year. Gross profit rose 20% to $47m and net profit after tax jumped 32% to $22.5m.
Chairman Rodger Finlay says the record result reflects excellent performance of the business over the period.
An interim dividend of 14c/share will be paid on April 1 - up 2 cents on last year's payment.
PGW's retail and water business delivered its strongest first half profit ever. All businesses traded well ahead of last year, which included new highs for some months.
The retail and water group's gross profit rose 30% to $44m on the back of total revenues of $470m, 13% better than the previous year.
Chief executive Stephen Guerin says commodity prices in general for New Zealand primary exports remain positive.
"While a degree of volatility in international markets continues with disrupted supply chains, inflationary pressures and a global pandemic, our business is diversified and continues to adapt to our clients' and market need," Guerin says.
Like most businesses, PGW says it is also facing supply chain challenges and Guerin says the company is actively seeking to mitigate supply risks.
"We have seen clients buying products earlier than usual to either lock in lower prices or secure product availability," he says. "The cost of moving products through the supply chain is increasing due to inflated freight charges."
Guerin says to try and ease the supply chain risks, PGW has been sourcing products earlier and is carrying more inventory.
However, the result was not all rosy for PGW with its agency business - where it buys and trades livestock - suffering a dip in revenue and profit. Gross earnings dropped by $2m over the previous year to $7.5m on the back of $82m in total revenues.
Guerin says PGW's livestock activity for the first six months has been impacted by wet weather conditions in the North Island and Covid-19 restrictions - including saleyard closures during Alert Level 4.
PGW is forecasting gross profit of $62m for the full year.
