The dairy sector's volatility prompted PGG Wrightson (PGW) to yesterday postpone giving any financial guidance, until its October annual shareholders meeting.
PGW yesterday announced its third consecutive year of earnings growth, booking an 18% gain in operating earnings before interest, tax, depreciation and amortisation (Ebitda) from $58.7 million a year ago $69.5 million.
While after-tax profit declined 22%, from $42.2 million a year ago to $32.7million, PGW will pay a full-year, 4c dividend, compared with 4.5c last year.
Its shares were down slightly to 45c following the announcement.
PGW chief executive Mark Dewdney said this year's profit was lower because last year's profit had benefited from a low effective tax rate and several non-operating gains, which was not repeatable this year.
He described the year's trading as a ''very strong result'', given challenges facing some sectors of New Zealand agriculture during much of the year.
''PGW is not immune to the challenges being experienced in some sectors, but the diversified portfolio of our agriculture business offers a degree of protection from cyclical volatility in any individual sector,'' he said in a statement yesterday.
Challenging market conditions in the dairy sector resulted in reduced demand for some of PGW's lower margin activity, such as grain, fertiliser and supplementary feed, which partly explained the flat revenue year-on-year, he said.
''Despite the dairy sector challenge in the second half, most of our individual business unit financial results have improved,'' Mr Dewdney said.
Craigs Investment Partners broker Peter McIntyre said the PGW result was a ''pass mark and reasonable'', but its decision not to give financial guidance might not be appreciated by investors.
''There's a cloud over the whole agri-sector at present. They've got headwinds on the way,'' Mr McIntyre said.
While its seed and grain division turnover was down from $529 million to $469 million, Mr McIntyre noted PGW's $494 million revenue from its retail division ''would be coming under pressure''.
''It seems doubtful PGW will have the ability to repeat this result next year, given the dairy sector volatility,'' he said.
Forsyth Barr broker Andrew Rooney said PGW reported a strong operating Ebitda result, ahead of consensus and recently provided guidance range.
PGW's seed and grain division, encompassing its New Zealand, Australia, South America, International and R&D operations, performed ''extremely well'', highlighting the potential strength of the division when the majority of markets perform well.
However, Mr Rooney said Mr Dewdney's outlook statement was preparing investors for a softer year, having highlighted that achieving earnings growth in full-year 2016 would be a challenge, given the headwinds facing dairying.
''The softer retail business performance has given us reason to be more cautious on that front, and while beef and sheep prices remain solid, we are cognisant of the potential for a wider reaching effect of dairy weakness,'' Mr Rooney said.
Mr Dewdney said the headwinds facing the dairy sector made increasing this year's result in the 2016 financial year ''a genuine stretch target''.
''Further improvements will be made within the business and we will continue to look for new growth opportunities,'' he said.
Given the volatility in a number of markets, and the need to assess the likely impact of this on PGW's clients, the company was deferring any forecast for the current fiscal year, until the annual shareholders meeting in October, he said.
