Shares in rural servicing company PGG Wrightson (PGG-W) fell 15% or 23c, to close at $1.30, while shares in New Zealand Farming Systems Uruguay (NZFSU), in which PGG-W is a cornerstone shareholder, fell 20% or 15c to close at 60c.
Six months ago, NZFSU shares were worth $1.89. Both stocks attracted healthy volumes of over 320,000 shares traded yesterday.
Dunedin-based Rural Portfolio Investments, an investment company associated with the McConnon family, is also a major investor in NZFSU.
NZFSU said in a statement to the New Zealand Stock Exchange that tumbling global dairy prices had caught up with the company, which took New Zealand dairy farming technology to Uruguay.
It expected earnings before interest and tax (Ebit) to be a loss in the range of $US7 million to $11 million ($NZ11.8 million to $18.6 million), compared to forecasts of a loss ranging from $US8 million to $US10 million.
Milk prices had been expected to fall below US30c (51c) a litre but, measured by Fonterra's December online auction for whole milk powder, had fallen to US20c (34c) a litre.
"With production from Uruguay being predominantly exported, movements in international prices will flow through to revenue for NZFSU," the company said.
A day earlier, PGG Wrightson issued a similar warning on the back of weaker real estate sales, forecasting earnings in the range of $39 million to $45 million, compared to earlier forecasts of $46 million to $51 million.
NZFSU said that once customers were confident the market had bottomed out and with lower production likely from lower prices, milk prices should recover "significantly".
Earnings would also be impacted by lower production caused by dry weather, with the company's Uruguayan farms expected to produce 50 to 60 million litres of milk compared to earlier forecasts of 60 to 70 million litres.
Rainfall has been half the historic average, which meant fewer cows have been milked, but NZFSU intends increasing irrigation.
Lower milk prices would also mean livestock values would be back about 10%, but providing some balance were lower farm operating expenses, with savings from lower fertiliser prices.
NZFSU chairman Keith Smith said despite the lower earnings forecast, he was satisfied with progress, especially farm performance as measured by production and stocking rate indicators.
Milk production on the company's leading farms has averaged 16 to 17 litres a cow a day since the start of the new season in July, which gave confidence targets were achievable.
Mr Smith said NZFSU would continue to invest in farm development and has secured $US16 million in long-term funding from Uruguayan banks and further funding was being negotiated as needed.
No dividend would be paid to shareholders this year.
