27 Feb 2009

PGG Wrightson posts $32m loss

11:10 am on 27 February 2009

The country's biggest rural servicing company, PGG Wrightson, reported a rise in operating income for the six months to December but was left with an accounting loss of $32.8 million due to a range of non-trading factors.

The company says its livestock, supply, seeds, animal nutrition, and finance businesses have all performed well, boosting its operating revenue to $737.7 million, up 32% on the 2007 half year result.

The global financial crisis had the biggest impact on its real estate operation, which suffered a $4.3 million drop in earnings.

But the overall trading profit was offset by other factors, including fair value adjustments, which showed a loss of $47.2 million dollars compared with a profit of $10 million in 2007.

Most of that related to PGW's shareholding in the South American dairy farming venture, New Zealand Farming Systems Uruguay.

The company's failed attempt to buy a 50% stake in the Silver Fern Farms Meat Co-operative was also part of those one-off costs.

PGG Wrightson says the global economic crisis has forced it to review its business operations but chairman Craig Norgate says the outlook is positive and is on track to meet the full-year profit guidance issued last year.

The company expects commodity prices to reflect current difficult trading conditions until at least the start of the 2010 financial year.

But it says that will be offset by lower exchange and interest rates and confidence returning to the dairy sector.

PGG Wrightson chief executive Tim Miles says banks have committed to refinancing the company's debt. He says the company's $475 million funding package with a consortium of banks, which has yet to be signed off, vindicates the company's strategy.

Mr Miles says PGG Wrightson can pay the money back on time, through strong sales, savings initiatives such as lower stock levels and some asset sales.