Thursday, December 7, 2023

PGW records solid annual result

Neal Wallace
Fully imputed final dividend of 10c/share to be paid on October 3.
PGG Wrightson’s trading performance was its second strongest since the divestment of PGW Seeds.
Reading Time: 3 minutes

Prospects for the coming year are likely to be a bit bumpy for the primary sector, but in the longer term the head of one of New Zealand’s largest rural service companies is optimistic.

PGG Wrightson chief executive Stephen Guerin said with falling product prices and rising costs, the publicly listed company will be watching its costs in the coming year but has no restructuring plans.

“It’s our people who have made this business and getting people is hard, so better to keep the ones we’ve got.”

Guerin was commenting after the company announced its second-best annual financial result since the divestment of PGG Wrightson Seeds, bettered only by the 2021 result.

Compared to 2021, operating earnings before interest, tax, depreciation and amortisation (EBITDA) of $61.2 million were down $6m (9%) and the net profit after tax (NPAT) of $17.5m was down $6.8m (28%).

Revenue grew to $975.7m, up $23m (2%) on the back of increased market share, with proceeds soon absorbed by rising costs.

Guerin told Farmers Weekly that growth reflects the efforts of staff and the technical, research and development network that supports them.

“It’s a result that reflects a challenging year,” he said.

Operating cash flows during the year were $25.5m, $1.8m higher than the year before, impacted by larger income tax payments on last year’s record results along with higher funding costs.

Working capital investments during the year included implementing a strategy to grow its GO-STOCK receivables book to $74m by the end of the 2023 year,  an increase of $7.9m or 12%. 

Capital expenditure of $17.1m was $8.4m higher than at the start of the year, driven by significant investment in its IT Systems Business Improvement Programme (which includes both operating expenditure and capital expenditure components), which is due to go live in the 2024 financial year.

Net interest-bearing debt was $65.3m at year end, an increase of $32.5m from the prior period.

During the year the company contended with a wet and cold spring that delivered frosts that affected crops, along with two cyclones in late summer that left a trail of crop and rural infrastructure damage in the North Island.

It will take several years before those areas recover, he said.

The wet spring led to increased sales of agricultural chemicals.

It was a record performance for the Retail & Water business, which incorporates Rural Supplies, Fruitfed Supplies, Water and Agritrade, with the division recording an operating EBITDA of $54.1m, up $1.6m (3%), with revenue $24m high to $785.3m, a lift of 3%.

This was driven by increased sales in the animal health, fencing, general merchandise and horticultural categories.

Guerin said viticulture is one bright spot, and horticulture is expanding into Waikato and Canterbury.

A Rural Supplies store in Waikato was recently rebranded Fruitfed Supplies.

Global supply chain disruptions meant the company had to carry higher levels of inventory, which caused challenges with storage and working capital management.

Its Agency Group, incorporating livestock, wool and real estate, recorded an operating EBITDA of $16.1m, down $5.8m (26%) with revenue steady at $188.8m, just $0.6m below the previous year.

The livestock business faced difficult market conditions from softer sheep pricing, weather events and declining tallies, but greater pasture growth than normal created unseasonal summer and autumn trading.

The GO-STOCK grazing programme achieved a second record year with the highest balances recorded in terms of values and tallies, while the PGW Velvet business achieved its best result ever from trading higher volumes.

The board has declared a fully imputed final dividend of 10c/share, to be paid on October 3.

This will effectively bring the total fully imputed dividend for the year up to 22c/share.

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