By Paul McBeth
Feb. 19 (BusinessDesk) - PGG Wrightson has lowered expectations for its continuing operations even further, saying weak international demand for wool and a slow start to spring farm listings weighed on earnings.
The company flagged in December that its seed and grain business would post a loss, but wanted more time to determine the impact the local weather would have on its rural services arm.
Today, the company said operating earnings from the rural services division in the six months through December were about $5 million below the $23.4 million reported a year earlier.
Wrightson's retail business typically generates 85 percent of its earnings in the first half, and that's not expected to catch up in the second half. Its water business was also held back by a lack of on-farm development, it said.
"This softening in performance is also partly attributable to the impact of weak international demand for wool and a slow start to the spring season in the rural real estate sector," chief executive Ian Glasson said in a statement.
Wrightson will be a shell of its former self once it completes the sale of its seeds division to DLF Seeds for $434 million in cash and debt. The deal was cleared by the Commerce Commission last week, and Wrightson today said DLF has received counterparty consents from research and development joint venture partners.
The NZX-listed firm said it will record a capital gain of at least $120 million once the transaction is completed, which will then flow through to net profit.
Wrightson has signalled plans to return up to $292 million of the proceeds to shareholders via a buy-back or share cancellation.
The shares fell 3 cents, or 5.4 percent, to 53 cents today, valuing the company at $400.1 million.