PGG Wrightson Finance had a strong year but its associated real estate business has experienced a continued troughRURAL servicing company PGG Wrightson has returned to profitability, reporting a $4.1 million profit after a $28 million turn around in the six months to December 31.
However, the result comes off lower revenue.
The result reversed a $32.8 million loss a year earlier, which was accentuated by non-operating losses of $8.1 million and fair-value adjustments of $47.2 million.
In the period under review, these items contributed $6.3 million.
The company yesterday announced further restructuring, this time to its board.
The board's membership will be reduced from 11 to 10, and Sir John Anderson has been named the new chairman.
Three directors will retire as well - Craig Norgate and Baird McConnon, who were nominated by Rural Portfolio Investments, and independent director Murray Flett.
They have been replaced by Alan McConnon, from Dunedin-based RPI, and two representatives from new cornerstone shareholder Agria Corporation.
Retiring chairman Keith Smith said the focus for the coming period was finalising the right business model for the future and generating cash.
He said the result for period under review was in line with forecasts and included the expectation of lower revenue, $583.3 million compared to $735.3 million for the previous corresponding period (pcp), due to conservative spending by farmers and a lack of liquidity in the farming sector.
The result was helped by a lid being kept on costs, with the cost of sales falling from $579 million in the pcp to $448.2 million to give a gross profit of $135 million compared to $156 million.
Chief executive Tim Miles said while farmers cut costs and concentrated on reducing their own debt, company turnover was also affected by excellent growing conditions, which meant less demand for fertiliser, supplementary feed and fewer animals being traded.
While PGG Wrightson held its share of the livestock market, Mr Miles said sheep tallies were back 835,000 and cattle 55,000 compared to the pcp.
Sales to the viticulture sector were also hit hard as the sector faced low income.
This meant the customer services division reported a 26% reduction in earnings before interest, tax, depreciation and amortisation (ebitda).
PGG Wrightson Finance had a strong year, but its associated real estate business "has experienced a continued trough".
Mr Miles said there were sellers of farms and people wanting to buy them but little credit available.
Earnings from Funds Management and insurance grew.
Seed and grain sales increased 5% but margins were squeezed.
Plenty of rain in Australia had led to optimism of strong sales in the second half of the year.
Net interest and finance costs were higher at $24.2 million ($15.8 million pcp) due to repaying funding from South Canterbury Finance, settling an agreement with Silver Fern Farms and higher swap rates, but those cost should start to fall.
The board still expected an end of year ebitda of $73 million and profit from continuing operations of $24 million.
In line with board policy, Mr Smith said no dividend would be paid this financial year but payments should resume in the 2011 year.
