Friday, July 1, 2022

Crafar payout could mean dividend

Repayment of the Crafar funds has put the PGG Wrightson balance sheet in a position to give some early guidance on a new dividend policy, managing director George Gould says.

“I think you can expect something before too long, in the near future.’’

Gould emphasised he was referring to policy rather than an actual payout, but dividends are clearly on the cards – for the first time since April 2009.

The receivers for the Crafar farms have repaid Wrightson about $25 million, covering secured debt owed on the properties, after the farms were sold to Chinese company Shanghai Pengxin.

The funds mean that the company can reduce its term debt to about $85 million from the $111m level beforehand, chief financial officer Rob Woodgate said. Wrightson had about $980m in total assets at last June 30.

Over the next few months, going into the busy time of the trading year, the group will also take on about $30m to $50m in seasonal debt.

“The balance sheet is now where you’d expect a solid, significant New Zealand company to be, and long may that continue,’’ Gould said.

The combination of strong balance sheet and stable earnings gave the group flexibility, including thinking about dividends if that is what the board wished. “That wouldn’t have been easy six months ago, and impossible a year ago,’’ he said.

Wrightson makes about two-thirds of its earnings in the second half of the financial year (between January and June) and current trading going into the end of the first half was consistent with or slightly better than last year, Woodgate said.

Gould said lower sheep values meant it was harder to make money in livestock trading, though beef prices remained solid, and NZ forage seed sales were very strong.

It is about this time of year that the group has “fingers crossed’’ for favourable weather conditions in Australia to help the Seeds business provide its crucial share of group revenues and earnings.

Australian conditions have been difficult in the last two years.

In an analysis of the Wrightson business, sharebrokers Forsyth Barr have concluded it is making excellent progress in its operating recovery and forecast a 30% lift in after tax earnings to $31.3m for the year to next June 30, and payment of a 2c a share dividend.

Gould agreed with the philosophy, but said he could not comment on the figures. Wrightson hasn’t issued any earnings forecasts of its own for the year.

The Forsyth Barr report also noted that Gould’s contract as managing director was up for renewal in January.

Gould said the stability of the whole management team, and having the right people in the right place,  had been the reason for Wrightson’s recovery over the last two years. “My role is ongoing, there’s no specific end date, and it’s steady as she goes as far as I’m concerned.’’

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