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Wrightson cuts guidance on loss of NZS, outlook for farming

Wrightson cuts outlook on loss of Farming Systems contract, poor agricultural recovery

By Jason Krupp

Dec. 17 (BusinessDesk) - PGG Wrightson Ltd. has cut its full year earnings guidance, with the slower recovery in the agricultural sector, the disposal of the NZ Farming Systems Ltd. management contract and increased debt provisioning weigh on performance. The stock fell 8.3% to 44 cents.

The rural services company said earnings before interest tax depreciation and amortisation for the year is forecast to come in at between $58 million to $61 million, compared to an EBITA of $70.5 million reported in the last financial year.

As a result full year net profit has been revised downwards to between $15 million and $18 million, compared with $23 million earned previously. First half earnings, which will be release on Feb. 23, are expected to come in 40% weaker compared to the same period last year.

Wrightson said the disposal of the management contract with Farming Systems in August had pared EBITDA back by $3.9 million.

The poor recovery in the rural sector due to adverse weather conditions was also putting pressure on revenues, with Fonterra Cooperative Group's forecast of a 30% increase in the milk price to $6.90 per kilogram of milk solids yet to be felt in terms of inputs and capital expenditure.

Additionally PGG Wrightson Finance has increased its provisioning, with two large dairy loans accounting for the majority of the provisions.

The company said it has reduced its bank debt to approximately $133 million, down from $157 million at the end of the first quarter after the $19.7 million sale of its stake in Farming Systems to Olam International at 70 cents a share. It expects to reduce this further with the settlement of outstanding performance fees from the South American diary operator and the management contract internalisation.

Wrightson also said the outlook from its two acquisitions in the period, Keith Seeds in Australia and Corson Maize Seed division in New Zealand, is seen as positive.


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