Listed rural servicing company PGG Wrightson has revised down its forecast operating earnings, citing low farmer confidence, economic volatility and subdued international markets.
In an update to the New Zealand Stock Exchange, acting chair U Kean Seng advised that the company is forecasting operating earnings before interest, tax, depreciation and amortisation (EBITDA) for the current financial year of around $52 million.
Last year’s full-year operating EBITDA was $61.2m.
Trading in the first quarter of this financial year was behind last year due to economic conditions, a lack of confidence among farmers and growers and a subdued real estate market.
He said medium- to long-term sector fundamentals remain strong but described the current operating environment as “challenging”.
“However, it is early in our financial year, and we will be in a better position to assess the full year forecast again after the spring trading period.”
In addition to the economic volatility, he said NZ’s monetary policy is being felt with inflation levels beginning to trend lower but higher interest rates raising borrowing costs.
While some parts of the country are recovering from last summer’s cyclones, there is concern about the potential for drought conditions in the coming months from the El Niño weather pattern.
Export demand from key export markets have declined and China’s subdued economic recovery is hampering confidence, which is making farmers and growers cautious.
While this year is challenging year, he said that is balanced by strong medium- to longer-term fundamentals and an expecting improvement in the economies of key export markets as demand for protein grows.