Wrightson posts record earnings, lowers dividend and eyes reinvestment options
By Tina Morrison
Aug. 14 (BusinessDesk) - PGG Wrightson, which is selling its dominant seed and grain business, posted record full-year earnings but lowered its final dividend payment to shareholders, saying it was eyeing reinvestment opportunities.
Operating earnings before interest, tax, depreciation and amortisation rose to a record $70.2 million in the year ended June 30, in line with its forecast for earnings at the top end of its guidance range of $65 million to $70 million, and ahead of $64.5 million a year earlier, the Christchurch-based company said. One-time items pulled net profit after tax down to $18.9 million from $46.3 million.
Wrightson is reducing its final dividend to 1.25 cents per share from 2 cents last year, which pulls the 2018 annual dividend down to 3 cents from 3.75 cents in 2017.
"In declaring today’s dividend, the board balanced the one-off nature of these items affecting npat and the strong underlying trading performance against the reinvestment opportunities available to the business," deputy chair Trevor Burt said in a statement. "We felt it prudent to reduce the final dividend this year."
The country's largest rural services business is undertaking a strategic review with Credit Suisse (Australia) and First NZ Capital, exploring growth opportunities, its capital and balance sheet requirements and potentially its shareholding structure. Earlier this month, it agreed to sell its seed and grain business, its largest unit, to Danish cooperative DLF Seeds for $421 million in cash and $18 million of debt repayment. It said it could return up to $292 million to its shareholders and was evaluating the full range of options, including debt reduction, distributions to shareholders and strategic growth opportunities.
Chief executive Ian Glasson said today the company would provide more information on its progress and an earnings forecast, at its annual shareholder meeting in October.
In the latest year, operating ebitda for seed and grain fell 4 percent to $35.6 million as strong sales volumes in New Zealand were offset by extremely dry conditions in South America and Australia.
Its agency group operating ebitda rose 12 percent to a record $20.1 million as higher sheep prices in the livestock business offset a lower number of dairy transactions while volumes in the wool business returned to more normal levels on a lift in underlying wool prices.
Meanwhile, its retail and water group increased operating ebitda 30 percent to a record $23.8 million. Glasson said the improvement was evenly split between retail and water, which improved its contribution despite the ongoing challenges facing the irrigation sector.
PGG Wrightson's shares, which are 50.2 percent owned by China's Agria Corp, last traded at 67 cents, and have gained 12 percent over the past year.