Pyne Gould expects $30-33 million loss

Pyne Gould Corporation (PGC) has taken its agribusinesses losses on the chin while hoping its proposed banking spinoff will compensate.

After announcing the sale of its PGG Wrightson (PGW) shares to Chinese interests for a loss of $30 million, PGC says it will barely break-even in its normal operations for the half year to December 31.

It says it will post a loss of between $31 million and $33 million, with the underlying result after the PGG Wrightson writedown ranging between a $1.7 million net profit and a $300,000 loss. This compares with a net profit of $10.1 million a year ago.

The extra losses arise from the cost of the merger of its finance unit Marac with the Southern Cross (SCBS) and Canterbury (CBS) building societies to form a proposed “heartland” regional bank, and participation in the deposit guarantee scheme.

The will some $2.2 billion in assets and has court approval, though it is yet to be registered with the Reserve Bank.

PGC says it has no idea whether the spinoff will be profitable, as it is distributing most of its shares in the new bank to shareholders and will sell the rest in a placement.

“A profit or loss will result from the difference between the carrying value of BSHL (Building Society Holdings) and the market value of the holding at the time of distribution,” it says. “Heartland” is due to list early in the new year.

PGC will, however, book a notional loss of $6-7 million in the half-year result “representing the difference between the disposal of 28% of Marac at book value and the acquisition of 72% each of CBS and SCBS.”

That leaves PGC with its Perpetual Group, a funds management business that is expected to lose $4-4.5 million after writedowns in its property-based loans.

"This has been a tough transition with hard decisions having to be made to deal with the legacy of the poor property lending decisions of the past," managing director Jeff Greenslade says in a statement.

"The agreement to sell our stake in PGW marks the end of an era, but continues our strong drive to focus our activities around our core strategy."