Analysts are predicting a sharp decline when rural servicing company PGG Wrightson announces its full-year result late next week.
Forsyth Barr said debt concerns and weak on-farm spending prompted it to forecast a reported profit before abnormals of $30 million-$32 million, down from earlier forecasts of $36 million-$42 million.
Last year, PGG Wrightson (PGG-W) reported a $39.1 million full-year profit.
Forsyth Barr also revised down its $42.4 million forecast profit for the 2010 financial year, to $38.6 million, saying lower sales of rural supplies, seeds and feed would impact on next year's income.
As well as farmers cutting spending, there could be an impact on PGG-W from some New Zealand and Australian dairy farmer-shareholders in Fonterra cutting production rather than buying shares, as they were required to cover any growth in milk flows.
While PGG-W has confirmed it was complying with covenants, Forsyth Barr said it was an aggressive debt amortisation programme, but achievable.
At December 31, 2008, PGG-W had core debt of $422 million with bank debt at the end of the 2009 financial year expected to be $400 million.
It has banking facilities of $475 million, consisting of $275 million of core debt due in September 2011, $125 million of amortising debt due December 2010 and $75 million in seasonal debt through until April next year.
The amortisation facility was expected to be paid down through working capital initiatives, sale of non-core assets and a revised bonus share dividend distribution, leaving all PGG-W's retained earnings available to repay debt.
Forsyth Barr has retained its hold recommendation for the stock, which it valued at $1.57.
PGG-W shares were unchanged at 91c on Friday.
