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PGG Wrightson posts 24% gain in operating income on strong sales across the board

PGG Wrightson [NZX: PGW] reported an operating earnings gain of 24 percent in the first-half as the rural services firm controlled by China's Agria Corp achieved growth in all its business units except wool. The shares jumped 6 percent to 44 cents.

Earnings before interest, tax, depreciation and amortisation were $22.3 million in the six months ended Dec. 31, from $18 million in the same period a year earlier. Net profit jumped to $13 million from $4.8 million, reflecting gains made from accounting adjustments of continuing operations including derivatives and biological assets.

The Christchurch-based company expanded its irrigation business, buying Water Dynamics and Aquasec from Switzerland's Pentair for an undisclosed sum last year. Its PGG Wrightson Water business reported 32 percent sales growth to $33 million from the same comparable period a year earlier.

It also launched an internal 'One PGW' strategy in October to streamline its interests, which are divided into retail, livestock, seed & grain and other rural services, which includes PGG Wrightson Water.

Other rural services grew EBITDA by 74 percent to $5.1 million, although earnings from wool declined 42 percent, which the company said reflected farmers reducing sheep numbers following the drought and continued land conversion to dairy. There was significant growth in real estate earnings to $2 million from a break even position of $174,000 a year earlier.

Its livestock division sales slumped 42 percent and earnings rose to $2.7 million from $812,000. The retail division, which includes Rural Supplies and Fruitfed brands, grew sales 12 percent to $297 million, and reported an EBITDA rise of 13 percent to $21 million. Seed & grain revenue rose 17 percent to $255 million and earnings nearly doubled to $12 million.

Last year the company sold its shares in Heartland Bank for $11.2 million, to reduce debt and shift to growth.

The company will pay a dividend of 2 cents a share down from 2.2 cents a year earlier.


More by Suze Metherell

Comments and questions

Read beyond the press release.

they are paying a dividend greater than the net profit. They earned $13.4m in NPAT but paid out around $19m in dividends including tax.

How is this sustainable?

PGW whole year earnings over 70% come from second half.

It's a highly seasonal business, agreed, but that's all the more reason why they shouldn't be paying out dividends greater than NPAT. Remember last year when the drought savaged their earnings?

The dividend policy is not about what is best for shareholders. It's what is best for one shareholder - Agria. The policy is to keep major shareholder Agria solvent. Sadly, PGW will never reach full potential when its dividend policy is all about keeping a major shareholder afloat, instead of investing their money into PGW!

The place is full of dead wood. 24% and the stock only rises a few cents?? The market just isn't interested.