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Wrightson shares rally as rural, seed & grain drive profit

Wrightson shares rally as rural services, seeds & grain drive profit rebound

By Jonathan Underhill

Aug. 12 (BusinessDesk) – Shares of PGG Wrightson rose to their highs of the past five months after the rural services firm controlled by China’s Agria Corp posted full-year earnings that beat estimates, driven by its Rural Services and Seed & Grain units.

The stock rose 8.9 percent to 43 cents, a level it hasn’t surpassed since February. Operating earnings before interest, tax, depreciation and amortisation was $58.7 million in the 12 months ended June 30, beating the guidance it gave in June and exceeding the $57 million forecast by Forsyth Barr.

Wrightson’s rural services division delivered the biggest contribution to earnings in the latest year, with net profit of $37.5 million, from an impairment-marred loss of $78 million a year earlier. Sales rose 11 percent to $$766 million. Seed & Grain, which took the biggest share of the previous year’s impairment, posted profit of $23.9 million from a loss of $206 million. Sales climbed 9 percent to about $530 million.

The company refrained from giving guidance for the current year, saying it will wait until its annual meeting in October, given the volatility in dairy prices and the potential impact on customers. Still, it said the outlook for its core sheep, beef, arable, horticulture and viticulture markets “is positive” and the company plans to “put more emphasis on the dairy, water and agronomy sectors in New Zealand.”

“Operating Ebitda was excellent – above expectations, with substantial margin growth from both Rural Services and Seed & Grain operations,” said James Bascand, an analyst at Forsyth Barr.

“FY14 has been a favourable year, such that sustainability of earnings may be a challenge across all segments,” he said. “In saying that, the underlying market share and market sizes of some segments have undisputedly increased and will underpin a higher base level of earnings going forward.”

Wrightson’s Retail business lifted profit to $17 million from $15.9 million as sales rose 12 percent to $486 million, while livestock posted profit of $10.4 million from a loss of $73.8 million as sales fell 22 percent to $76.9 million.

Profit from Other Rural Services was $10 million, from a year-earlier loss of $20.5 million as sales climbed about 30 percent to $202.8 million.

In omitting any immediate forecast for 2015, chief executive Mark Dewdney said the company is confident it will increase operating Ebitda in the current year.

Net profit was $42.3 million in the 12 months ended June 30, from a loss of $306.5 million a year earlier, when it took a $321 million charge to write off goodwill from its 2005 merger. Sales rose to $1.2 billion from $1.13 billion.

The Ebitda to revenue margin at Wrightson’s Rural Services division widened to 6.9 percent in the latest year from 6.5 percent, while for Seed & Grain it expanded to 6.4 percent from 5.4 percent.

The company will pay a fully imputed dividend of 3.5 cents a share on Oct. 3, with a record date of Aug. 26. The payment is made up of a final dividend of 2.5 cents and a special dividend of 1 cent and brings total dividends for the year to 5.5 cents.


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