PGG Wrightson wants a bigger share of dairying, just as the industry faces a slumping payout forecast.
The listed rural services company had operating earnings of $58.7 million in the year to June 2014 compared with just under $46m the year before.
It forecasts higher operating earnings before interest, taxes, depreciation and amortisation (ebitda) for the year ahead based on its first quarter performance.
PGW issued a final dividend of 5.5 cents a share on the back of its 2013/14 result, which chairman Alan Lai described as its strongest for several years.
The company under first-year chairman Lai and new chief executive Mark Dewdney was putting more energy and cash into dairying, shareholders were told at the annual meeting in Napier yesterday.
Dewdney said almost every PGW unit had contributed to the company’s $13m increase in group operating ebitda in the past year.
It should be better-placed to update its earnings guidance at half-year results announced in February, he said.
Dewdney, formerly head of dairy services company Livestock Improvement, said PGW had added 13 new dairy positions to its livestock team in the past year.
Its trading of dairy stock was the second highest since 2005 – at a time when dairy prices and cattle values were above average – but the business wanted to do more in the sector, Dewdney said.
Some parts of the PGW dairy business were «underweight» in their offering to dairy farmers and had not kept pace with the industry’s increasing importance, he said. The company was recruiting more dairy specialists and training more staff.
PGW had also changed its approach to live-shipments of dairy cattle, by working with a subsidiary of ASX-listed RuralCo Holdings to export stock to China.
PGW’s first shipment to China in many years was delivered successfully last month and it was negotiating more shipments.
While there had been a lot of attention on the milk price, PGW believed that «ultimately» prices would rebound to a medium-term range of $6-$7 kilogram milksolids.
The forecast was 24 per cent lower at $5.30kg milksolids with some commentators expecting this to fall further.
Contrastingly the outlook was positive in PGW’s beef, arable, horticulture and viticulture markets.
Prices were solid, the dollar was lower and the weather lately had generally been benign.
Growth within these sectors, plus growth in Australia and South America, would continue to «offset some of the weakness in the dairy sector».
In other business units, PGW’s irrigation and pumping had acquired Water Dynamics and Aquaspec in the past year.
Overseas, PGW was in South American real estate, irrigation and livestock but «ongoing investment is required to ensure that we maintain our leadership to maximise the opportunity», Dewdney said.
PGW was also targeting China, home of majority owner Agria, as a source of wholesale, bulk imports of farm inputs. This was linked to development of «house brands» for New Zealand customers. In exporting, the company was targeting Chinese trade in both wool and livestock.
Source: Stuff
