PGW shareholders question health of Chinese shareholder

PGG Wrightson shareholders have been told there is “zero chance” of Chinese half-owner Agria going under amid speculation about its financial health.

At PGW’s annual shareholders meeting in Auckland today, Agria chairman Alan Lai – also a PGW director up for re-election – was asked to reassure shareholders about his firm’s financial health.

He said twice there was “zero chance” of Agria being put into receivership.

Agria's PGG Wrightson-related debt is two loans totalling $35 million, against Agria's $US200 million net assets, he says.

"I don't understand where you get this judgment from," he said during an exchange with a shareholder.H

Mr Lai says Agria is not considering selling its stake in PGW "at the moment".  

PGG Wrightson director Bruce Irvine says the company does not wish to comment on Agria’s issues.

He preferred to talk about operational matters and some legacy issues left over from the sale of the finance arm.

That included being repaid in full $25 million owed by the failed Crafar farm enterprise. That money will be repaid by the end of November or the first week in December, he says.

Meanwhile, Mr Irvine says the board will put forward a dividend policy within the next 12 months.

Agria – a new hope

Agria bought into PGW in 2009 and launched a partial takeover in 2010.

It funded the $144 million 50.01% acquisition partly through debt and partly with equity financing through New Hope International, a much bigger Chinese agricultural conglomerate.

New Hope holds an option to require Agria to repurchase its shares in Agria Asia Investments between May 2013 and May 2014.

More pressing is a bank loan and a $10 million loan from Livestock Improvement, which matures this month.

Yesterday LIC said it was in talks with Agria over the loan regarding payment.

“In order to meet these repayment and repurchase obligations, we may need to extend our existing credit facilities or obtain new credit facilities,” Agria says in its latest annual report.

“If we are unable to extend existing facilities or obtain new ones, we may be required to sell a portion of our shares in PGW, which may lead to us no longer consolidating PGW’s results of operation, which would in turn have a material impact on our future reported results of operation.”

Agria shares have fallen below $1 on the NYSE. The exchange rules require the shares to trade above $1 and it has given Agria until mid-January to comply – otherwise it risks being delisted.

Last month the company announced an improved operating performance with earnings before interest, tax and depreciation (EBITDA) for the year ended June 30, 2012, at $55.2 million compared to $49.4 million in the year ended June 2011.

Net profit after tax was at $24.5 million, a $55.2 million turnaround from the 2011 loss of $30.7 million.

However, much of that was the result of a turnaround in accounting treatment of a supply contract with Silver Fern Farms.

See NBR Shoeshine column here.

dbridgeman@nbr.co.nz
dwilliams@nbr.co.nz