EU dairy co-ops to merge
Two European dairy co-operatives are set to merge and create a €14 billion business.
Guerin spoke to Rural News earlier this month following the release of the rural retailer’s half-year results.
Those results saw operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) drop by $17 million to $44.2 million.
The retailer also reported a net profit after tax (NPAT) of $3.1 million, down from $14.5 million in the previous financial year.
“It’s a reflection of the market,” Guerin says. “It’s not a result that we would like because the environment’s tough and we’re not declaring a dividend for our investor shareholders, so that’s always important to any commercial business.”
He told Rural News that PGG Wrightson staff have been operating in a difficult environment.
“Our customers have faced some challenging times for the returns of their businesses, so that’s been a tough environment,” he adds.
“Having said that we have made a profit. Some others in the sector haven’t done that and are challenged in that regard… and we’re pleased that we’ve held up our market shares as well.”
Guerin says PGG Wrightson has been working to adapt to the current environment by managing its operating costs, securing good prices for goods produced on farm like velvet and wool, and by advising farmers and growers.
However, he says supply chain pressures are starting to ease.
“As a rule of thumb, if we were sitting here a couple of years ago, you could be talking five to six months for supply chain product to arrive.”
Guerin says this was not the case for every product.
“You’re now down to a two-to-three-month window, so that’s good at that level,” he adds.
Guerin says there have been some pricing eases as well, particularly for fertiliser.
“Equally on the output side… we’ve seen some container prices ease.”
He says that so far 2024 has been a good year for PGG Wrightson’s velvet business but import restrictions going into the China market could prove to be a headache. Late last year, Chinese officials notified the Ministry for Primary Industries (MPI) of changes to China’s rules for imported frozen velvet used in traditional Chinese medicine.
So from 1 May 2024 towards the end of the half-year captured in the PGG Wrightson results, only dried velvet could be imported into China, from any source, for use as a traditional Chinese medicine.
“It’s not a supply chain issue as you would traditionally think about it, but it is a supply chain issue if you can’t sell it,” Guerin says.
“New Zealand effectively ends up with one market because we sell premium velvet, that’s the South Korean market… if you don’t have a competitive market future, customers can be a bit challenged in that space,” he explains.
He says that if the issues regarding those imports are not solved, New Zealand would, effectively, sell velvet to one single market.
“There are other markets, but from a volume perspective, the South Korea and China markets dominate, and it would create some price tension on the downward side.”
Guerin says he’s hopeful, however, that dialogue with Deer Industry New Zealand (DINZ) and MPI will help matters.
“We’re hearing good things and we’re hopeful that this issue is going to be resolved, but it’s not resolved yet,” he concludes.
