PGW
24/02/2016 08:31
HALFYR
PRICE SENSITIVE
REL: 0831 HRS PGG Wrightson Limited
HALFYR: PGW: Half Year Results Announcement
PGG Wrightson trading well despite tougher conditions
PGG Wrightson Ltd* (PGW) has announced its second-strongest interim
performance for eight years.
For the six-months ended 31 December 2015, PGW achieved Operating EBITDA** of
$30.9 million, down $2.9 million from the record result in the corresponding
period last year.
PGW's Board declared a fully imputed dividend of 1.75 cents per share, which
will be paid to shareholders registered at the record date of 10 March 2016.
The dividend will be paid on 5 April 2016.
Mark Dewdney, Chief Executive, called it "a very strong result given the
challenging trading conditions in many agricultural markets. The positive
momentum we've built as a group has been sustained and we have confidence
that we've outperformed the market as conditions in the agricultural sector
have tightened over the past 12 months.
"Our trading performance through the first half is a testament to the broad
base and resilience of our business. We have a clear strategy that we
continue to execute well. Clarity of strategy and engaged staff have
positioned our business well to trade through the very volatile conditions
that currently exist.
"In market conditions such as these, customers need to get more benefit out
of every dollar they are spending on farm and this plays to our strengths in
terms of the quality of our products and the technical expertise of our
people. We believe our people are the key to our strong trading performance
and profitability. Staff engagement is at record levels and at this time it's
critical that our people are committed and willing to put in the extra
effort, both for our customers, and the business."
Commenting on the results, Mark Dewdney explained that "Low dairy prices, and
the perceived risk of drought from El Ni?o conditions led to more
conservative spending from PGW's farming customers in New Zealand during the
six months to 31 December 2015. Consequently, Group revenue decreased 5% and
net profit after tax decreased $3.7 million to $16.1 million against the
prior corresponding period."
Mark Dewdney said "that the diverse nature of PGW again assisted in balancing
the PGW's Group performance, with a number of offsetting business unit
performances.
"Retail increased Operating EBITDA by $0.5 million despite reduced revenue.
Horticulture and the performance of our Fruitfed business was particularly
strong this half.
"A lack of live cattle export activity led to Livestock's Operating EBITDA
decreasing by $0.8 million. Domestically, cattle and sheep tallies were
higher, but sheep prices were lower. Dairy volumes were also lower than the
prior year. The net effect was neutral, with earnings for domestic Livestock
overall in line with the prior corresponding period.
"Seed and Grain's Operating EBITDA decreased $1.8 million. Our South
American business has experienced a challenging start to the year with some
very wet weather and falling soybean prices reducing demand for seed and ag
chemicals. This was however offset by another strong result from our New
Zealand seed business. We are continuing to see a shift in farmer
preferences towards our higher-performing forage and crop seeds. Many of the
spring-sown forage options such as brassicas and fodder beet are increasingly
seen as a key part of animal winter plans. Demand for our dairy summer feed
options such as chicory are also growing as farmers look to reduce reliance
on imported supplementary feed in the lower dairy pay-out environment.
"We are comfortable with the position of our balance sheet, albeit with
increased levels of working capital and debt. The increase in net debt from
June 2015 is largely attributable to the increased seasonal working capital
requirements that are typical at this time of year. Also reflected in the
debt number are a significant number of investments transacted over the
period. These include the Agrocentro business investment, the construction
of the new logistics centre in Uruguay, the Grainland Moree business
acquisition in Australia, and our new grain drying facilities project in
Gisborne." Mark Dewdney said.
PGW Chairman, Alan Lai said "that it was particularly pleasing to see the
business continue to perform and maintain momentum through the challenging
market conditions. The results reflect well on the culture of the
organisation and the strategy that is in place and well understood by the
business. The 'One-PGW' approach has gained traction and has assisted in
unifying the diverse agribusiness offerings of the PGW Group in a manner that
both staff and customers were responding well to. The Board has confidence
in the strategy and the capability of PGW's management team to deliver on
it."
Turning to the outlook, Mark Dewdney said "PGW was maintaining its 2016 full
year Operating EBITDA forecast range of $61 to $67 million.
"While the sentiment in the dairy and sheep meat sector has deteriorated over
the last three months, there is strong confidence in the horticulture based
sectors that will provide further opportunities for growth. On balance, we
consider that this guidance range remains appropriate, though we are
realistic that the tough market conditions may push the final result towards
the lower end of the range.
"On the positive side, there was concern as we approached the height of
summer that the El Ni?o conditions could result in widespread drought. While
parts of New Zealand remain dry, and regionalised drought concerns haven't
completely dissipated, it does appear that with regular rainfall since the
start of the year, growing conditions have improved in most areas.
"Predictions of the hot dry summer conditions led to sheep farmers processing
more of their animals in the first half of the year. This is likely to
produce lower trading volumes for our Livestock business in the second half
of the year. Prices for lamb remain below the five-year average though this
is counter balanced by beef pricing which remains strong.
"Falling commodity prices have replaced El Ni?o at the top of the list of
things attracting attention. Although commodity price movements have been
mixed, the outlook for dairy prices in particular remains extremely
challenging.
"While there remain a wide range of external factors at play that will impact
our performance over the remainder of the financial year we remain optimistic
about the medium to long term prospects for agriculture and we consider that
PGW is well placed to capitalise on the opportunities in the sector."
Further information:
Mark Dewdney, Chief Executive Officer
Ph. 027 248 3151
End CA:00278184 For:PGW Type:HALFYR Time:2016-02-24 08:32:00
