Ann: FLLYR: PGW: PGG Wrightson Reports $55m turna

• Release Date: 22/08/12 10:30
• Summary: FLLYR: PGW: PGG Wrightson Reports $55m turnaround in bottom line profit
• Price Sensitive: No
• Download Document  7.96KB

					

PGW
22/08/2012 08:30
FLLYR

REL: 0830 HRS PGG Wrightson Limited

FLLYR: PGW: PGG Wrightson Reports $55m turnaround in bottom line profit

PGG Wrightson reports $55m turnaround in bottom line profits

Rural services leader PGG Wrightson Limited (NZX: PGW) has announced an
improved operating performance with earnings before interest, tax and
depreciation (EBITDA) for the year ended 30 June 2012 at $55.2m compared to
$49.4m in the year ended June 2011.

Operating revenue was up 7.2% at $1,336.8m compared with $1,247.2m for 2011,
while net profit after tax (NPAT) was at $24.5m, a $55.2m turnaround from the
2011 loss of $30.7m. A substantial turnaround in net operating cash flow to
$58.6m (2011: $4.9m) reflected a strong focus on working capital and
particularly debtor management, while enabling the company to reduce bank
debt. Net interest costs were reduced to $13.8m from $28.1m for the prior
period.

George Gould, PGG Wrightson's Managing Director, said the results had
reflected strong performances across the majority of business units,
highlighted by record returns from livestock, positive gains across both
retail and real estate operations and the successful reintegration of wool
brokerage into the business.

While the results of AgriTech were impacted by lower than anticipated sales
of proprietary seeds in Australia as a result of the wettest season on
record, the division remained an important contributor to earnings.

Mr Gould said the return to its core business over the year had prioritised
areas of improvement including employment and retention of quality staff with
the relevant technical skills and relationships with clients.

The company had also successfully exited the majority of loans that were held
under PGW Rural Capital, a special purpose vehicle formed to house loans
transferred from PGG Wrightson Finance Limited as part of the finance company
transaction. With the exception of the Crafar farms assets residual loans
valued at approximately $4m now remain, with some of these loan assets
already subject to sale contracts.  The Crafar farms assets are subject to a
sale contract that has received Overseas Investment Office approval.

PGG Wrightson Group revenue and earnings to 30 June 2012
Audited
 June 2012 $m June 2011 $m
Revenue 1,336.8 1,247.2
Cost of sales (1,038.1) (967.2)
Gross profit 298.7 280.0
Operating EBITDA 55.2 49.4
Depreciation and amortization expense (8.3) (10.1)
Equity accounted earnings of associates, non-operating items and fair value
adjustments
(4.5)
(47.0)
Results from operating activities 42.4 (7.7)
Net interest and finance costs (13.8) (28.1)
Income tax (expense)/income (3.3) 0.6
Profit from continuing operations 25.3 (35.2)
Profit/(loss) from discontinued operations (net of income tax) (0.8) 4.5
Profit/(loss) for the year 24.5 (30.7)

Cash flow highlights

For year ended 30 June
 2012 $m 2011 $m
Cash was provided from:
Receipts from customers 1,388.8 1,278.5
Dividends received 0.4 3.6
Interest received 21.2 61.2
 1,410.5 1,343.4
Cash was applied to:
Payments to suppliers & employees (1,320.3) (1,282.0)
Interest paid (26.0) (47.6)
Income tax received/(paid) (5.6) (8.9)
 1,351.9 1,338.5)

Net cash flow from operating activities
58.6
4.9

Operating performance

AgriTech
NZ$m June 2012 June 2011
 Revenue EBITDA Revenue EBITDA

Seeds and Grain
285.1 19.4
268.3 28.6
Agri-feeds 53.7 5.2 55.7 5.4
South America 96.2 5.5 95.7 4.2
AgriTech 435.0 30.1 419.7 38.2

Commentary

The Australian seed business has had a challenging year with returns
significantly impacted by  exceptionally high rainfalls in key markets in
Victoria and southern New South Wales for most of the autumn selling season.

The record rainfalls dampened demand making it difficult to deliver on early
season expectations. As in the previous year, there was either an abundance
of feed available to farmers or paddocks which were too wet to gain access to
re-sow.

The New Zealand seeds business reported results broadly in line with
expectations. The weather provided challenges in New Zealand, but not to the
extent experienced in Australia.  While the 2012 harvest was good, it was
delayed by the very wet conditions experienced in Canterbury throughout
December and January. This in turn placed pressure on the autumn selling
season as significant sales volumes were dependent on crop being harvested
and processed to be available for sale.

South America made gains from good forage seed sales in Uruguay through
strengthened relationships with strategic partners. In Brazil the company
achieved registration of a number of proprietary cultivars and increased
forage seed sales in the three Southern States.

The International division focused on increasing market development and trade
with China, with the PGG Wrightson representative in Beijing facilitating
access into this important market.

AgriServices

NZ$m June 2012 June 2011
 Revenue EBITDA Revenue EBITDA

Livestock
133.2 18.0
139.6 16.4
Retail 593.8 21.8 568.6 18.7
Wool 87.0 3.2 41.0 (0.9)
Other 83.2 3.0 71.7 (1.4)
AgriServices 897.2 46.0 820.9 32.8

Commentary

The livestock sector experienced high early season values for sheep, beef and
dairy which assisted this business unit in achieving a stand out financial
performance. Some key appointments saw a  strengthened dairy presence, with a
38% improvement in dairy cattle volumes handled for the season. Live dairy
cattle export and velvet sales also contributed strongly to earnings. With
the Silver Fern Farms procurement contract in it's third year, the business
is on track to meet its target volumes for the current season.

In retail, the Rural Supplies business had a strong year, benefiting from
increased Ag chemical sales on the back of positive growing conditions
through spring and summer. The introduction of the national Animal
Identification and Traceability (NAIT) programme has also served to promote
sales of animal management products. The performance of Fruitfed Supplies,
meanwhile, reflected the decline in grower returns across the major
categories of pipfruit, kiwifruit, grape and vegetable markets. The high New
Zealand dollar and  oversupply in some key overseas markets continued to
impact this sector, whilst the impact of Psa particularly on the gold
kiwifruit varietal remains cause for concern.

The wool business benefited from high wool production due to good feed levels
with more growers moving to contract positions in the wake of market
volatility. The Real Estate team had a positive year as confidence returned
to the rural and lifestyle market, reflected in a 54% improvement in revenues
from 2011. Irrigation and Pumping also had a positive year, with revenues up
28% on the back of new on-farm irrigation and dairy shed reticulation
development. Rural training company Agriculture New Zealand also posted solid
results.

PGG Wrightson Finance divestment

On 31 August 2011 PGG Wrightson sold its shares in PGG Wrightson Finance
Limited (PWF) to Heartland Building Society. As noted earlier, good progress
has been made in managing the realisation of the residual loan assets that
were retained as part of the PWF transaction.

Outlook

Mr Gould said the financial results endorsed the company's focus on staff
retention and client service. He said that the 2011/2012 financial year was
primarily about getting back to the fundamentals, building on the core
businesses to the benefit of our stakeholders, in particular our farming
clients.

"Unlike prior years the results were not impacted by one off items and
provisions and with the exception of climatic impacts on certain businesses,
we're pleased with the overall performance of the group. We also remain of
the view that the AgriTech business holds the potential to generate growth.
We are therefore anticipating growth in our significant business units and
driving for improved earnings for the coming financial year."

For additional information contact:

George Gould, Managing Director | +64 21 220 2342
Rob Woodgate, CFO | +64 27 458 8534
Email: Corporate Communications | [email protected]
End CA:00226254 For:PGW    Type:FLLYR      Time:2012-08-22 08:30:04