Analysts expect a net profit after tax (NPAT) of $9.5 million for the six months to December 31, which, compared on a like-for-like basis with the corresponding period a year earlier, would be a drop of more than 26%.
PGG Wrightson (PGGW) reported a net profit in the year to December 31, 2007, of $34.6 million, which was boosted by an $8 million management fee from New Zealand Farming Systems Uruguay (NZFSU), a $9 million gain on the NZFSU share price and $5 million from one-off gains.
NZFSU, 10.6% owned by PGGW, last week reported an $18.6 million loss for the six months to December 31. Its share price has fallen in 12 months from $1.96 to a current low of 40c, and it will not pay PGGW a management fee.
It has been a difficult month for PGG Wrightson. Its share price has fallen from $1.28 to 68c and it is in dispute with Silver Fern Farms over compensation for failing to complete a partnership arrangement last year.
Any exposure to this compensation was expected to be a cash item.
ABN Amro Craigs broker Peter McIntyre said the market would be looking for some indication that issue was close to resolution and also that it had arrangements for half its $330 million in debt, which was due for renewal or rolling over.
Investors would also want some indication of what cornerstone shareholder Pyne Gould Corporation was going to do with its stake. It will announce its interim result on Friday.
PGGW's lower result would primarily reflect the poor performance of the company's real estate arm, which was likely to report earnings $11 million below budget, and also its exposure to NZFSU.
Mr McIntyre said the PGGW result would also be affected by interest rate hedging and new accounting systems.
The rural servicing company would benefit from commissions from higher livestock prices but the volume traded was down and prices for beef cattle and dairy cows had been volatile.
Rural supplies and grain were also expected to have performed poorly, due to farmers not spending and falling grain prices, but Mr McIntyre said seeds would be the standout performer, given low inventory and major regrassing occurring in Australia.
Looking further forward, Mr McIntyre expected the full year result to be at the lower end of the $39 million to $45 million net profit after tax forecast by PGGW.
