Friday, March 29, 2024

PGW announces record result

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Significantly higher revenue growth boosts farm supplies company.
PGG Wrightson chair Joo Hai Lee.
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PGG Wrightson has announced a record result for the financial year ending June 30.

It reported net profit after tax of $24.3 million – up $1.6m or 7% on the previous year – and revenue of $952.7m, up $104.9m or 12%.

Its operating EBITDA was $67.2m, which was up $11.1m or 20%, and it declared a dividend of 16 cents per share.

PGW chair Joo Hai Lee said it is a result the PGW team is very proud of, after a year that was challenging on many levels. 

“Like all businesses we have had to navigate managing covid-19 protocols, dealing with a high proportion of health-related staff absences, responding to supply chain challenges, and resourcing the business in an extremely tight labour market.”

These results were achieved as a consequence of significantly higher revenue growth (up $105m or 12%) with margins broadly in line with last year.

Lee said the dividend will be paid to shareholders on October 3, bringing the total fully imputed dividends for the year up to 30 cents per share.

PGW chief executive Stephen Guerin credited a combination of factors, ranging from high returns in the primary sector to capital development in the industry – particularly in horticulture – and rising prices, which had lifted revenue, as well as an increased market share.  

Guerin said the company had handled covid-19 disruptions including staffing and supply chain issues well. 

To help mitigate supply chain risks, PGW sourced product earlier and carried more inventory that it had historically. It, like other sectors, is struggling to find staff in various areas of the business, he said.

Its retail and water businesses performed extremely well, reporting an operating EBITDA was $52.5m, up $15m on the prior year.

Fruitfed supplies also had an excellent year and its wholesale business division agritrade performed well over the year.

PGW’s agency group – consisting of its livestock, wool and real estate businesses – had an operating EBITDA of $21.8m, down $3.3m on the prior year’s strong result.

He said PGW’s real estate has enjoyed another successful year. While returns in the residential and lifestyle channels have been challenging, sale volumes of rural properties were strong.

“We anticipate continued solid performance in the rural property market segment with favourable spring appraisals and listings due to continued horticulture growth and carbon/forestry interest in sheep and beef properties,” Guerin said.

Its capital expenditure of $8.8m was $2m million higher than June 30, 2021, which was impacted by a slowing in the implementation of projects as a consequence of covid-related disruption.

Its net interest-bearing debt was $32.8m as of June 30 2022. 

Looking ahead, Guerin said the profitable run for most New Zealand agri sectors looks likely to continue through the remainder of 2022 and into the coming year. 

However, inflationary pressure on input costs will likely translate into reduced on-farm profits, and exporters will still need to navigate high shipping costs and challenging logistics.

For PGW, while the commodity outlook is positive, some clients are showing caution as they attempt to manage their costs, he said.

“We are seeing some cautiousness in this space. While dairy prices are at $9/kg MS-plus, the cost of production is up to $8,” he said.

Guerin said the business is conscious of the impacts of inflationary pressure.  

“Our margins have been stable and we have managed to absorb freight costs and have passed on freight costs so we haven’t price-gouged in this space.”

Clients are showing caution when it comes to purchasing decisions around inputs such as fertiliser.

However, in the horticulture sector, where crops tend to be long-term investments that need to be looked after, growers are still placing orders for inputs, he said.

But they are also wanting to ensure they have enough supplementary feed and so far there has been good forward demand for maize seed ahead of spring sowing.

“Forward orders are up slightly on last year. That suggests positivity and they need to ensure they have feed available for their animals,” he said.

“There is a degree of certainty here alongside some cautiousness around the discretionary spend.”

Further out, Guerin sees the emergence of biological products that will eventually replace agrichemicals usage on farms.

“This is an area of real significant change in the agricultural sector here in New Zealand.

“PGW is well placed in this space, we have good relationships with the multinational companies, we’re doing lots of research on these products in New Zealand, and they are probably two to three years away from commercialisation.”

PGW’s board will update expectations for the 2023 financial year at its annual meeting in October.

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