Drought erodes PGG Wrightson annual earnings by up to 27%

Dry conditions on both sides of the Tasman and lower livestock values curb prices.

PGG Wrightson, the rural services company which fell out of the NZX 50 Index this year, expects annual earnings to fall by as much as 27 percent as dry conditions on both sides of the Tasman and lower livestock values erode prices.

The Christchurch-based company expects earnings before interest, tax, depreciation and amortisation of between $40 million and $48 million in the 12 months ended June 30, down from $55 million in 2012, it says in a statement.

The decline was put down to the dry climate in Australia and New Zealand, lower livestock value and falling earnings from its Agri-feeds unit after disposing of its 4Seasons Feeds joint venture.

"While volumes and market share remain solid, prices are back approximately 30 percent compared with last year, and this has had a material impact on group earnings," managing director George Gould says.

"The business of PGG Wrightson reflects to a great degree the fortune of our farmer clients and this has been an extremely difficult trading year."

Wrightson's board had previously refrained from giving guidance, saying in March that there was too much uncertainty over the climate and what its impact would be on commodity prices.

The rural services company improved its earnings in the first half of the year, lifting net profit 55 percent to $4.8 million and declaring an interim dividend of 2.2 cents per share.

The shares rose 2.6 percent to 39 cents yesterday, and have shed 14 percent this year. The stock is rated an average 'outperform' based on five analyst recommendations compiled by Reuters, with a median target price of 44 cents.

(BusinessDesk)