28 Aug 2009

PGG Wrightson in red after settlement

6:03 am on 28 August 2009

A $50 million settlement for reneging on a partnership deal helped to push PGG Wrightson into the red last year.

The rural servicing company has reported a net loss of $66.4 million for the past financial year, compared with a profit of $73 million the previous year.

However, it actually made an operating profit of $30 million. But a range of non-trading items has resulted in an accounting loss.

The biggest of those was the settlement that PGGW paid to Silver Fern Farms after it was unable to get the funding it needed to complete a partnership agreement with the meat co-operative.

PGG Wrightson says its livestock, rural supplies, seeds, animal nutrition, horticulture supply and finance business are all performing well.

But it says the impact of global recession on the rural sector and the fall in dairy prices undermined the company's overall performance.

Excluding one-off items, PGG Wrightson's underlying profit fell 8% to $30 million.

Debt renegotiated

The downturn in earnings in the June quarter saw the company renegotiate a $473 million debt package with its banks after a potential breach of its covenants.

Managing director Tim Miles says PGG Wrightson will now pay $200 million to its banks by March next year, compared to the $125 million it agreed in February.

PGG Wrightson shares fell 5 cents, or 6%, to 79c on Thursday.