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PGG Wrightson almost doubled its debt last year. (File photo)
Rural services firm PGG Wrightson reported a 28% drop in annual profit as higher debt and a weaker real estate market weighed on earnings.
Profit fell to $17.5 million in the year to June 30, from $24.3m the previous year, the company said in a statement to the NZX on Tuesday. Revenue advanced 2.4% to $976.2m.
The firm’s debt almost doubled to $65.3m from $32.8m, pushing up its bank interest costs 377% to $4.6m.
Wrightson acting chairperson U Kean Seng said against “a challenging backdrop”, the company had generated a strong operating performance in most business units, with livestock, wool and water experiencing solid demand and its rural retail stores experiencing a “standout performance”.
“The exception was our real estate business which continues to operate in difficult market conditions,” he said.
Chief executive Stephen Guerin said the real estate market had experienced one of the toughest years in some time with high interest rates, stricter regulatory requirements, softening commodity prices, and uncertainty regarding the outcome of the general election in October all contributing to negative sentiment.
He said the decline in market activity resulting in significantly fewer sales.
Still, he said the real estate business had maintained its market share and increased share in some regions.
STUFF
The popular cow pat throwing competition at the New Zealand Rural Games in Palmerston North.
Wrightson’s retail and water division, which includes its retail stores and irrigation services, reported a 1.9% lift in profit before interest and tax to $37.9m as revenue rose 3.2% to $785.3m. The division’s net profit fell 3.7% to $24.5m as its interest costs more than doubled to $3.8m from $1.7m.
Its agency division, which includes its livestock, wool and real estate businesses, reported a 31% drop in profit before interest and tax to $7.6m as revenue slipped 0.3% to $188.8m. The division’s net profit dropped 57% to $2.6m as its interest costs jumped 36% to $3.9m.
The company spent $3m on upgrading its IT system, adding to its $700,000 spend the previous year. It expects to spend a further $5m on the project in the coming year.
U said it was too soon to forecast the company’s trading performance for the year, but it may provide an update at the annual shareholder meeting in October.
“While we are well positioned operationally as we move into the current financial year, we see continuing volatility and softening commodity prices for our clients and even more challenging macro market conditions out over the short to medium term than experienced in recent years,” he said.
Wrightson will pay shareholders a 10 cent final dividend, taking the full-year dividend to 22c, down from 30c the previous year.
Guerin declined to comment on the outlook for the dividend this year, saying it was a decision for the board.
Shares in Wrightson, which is 44% owned by Singapore-based Agria Group, slid 0.5% to $4.25 in late-morning trading on the NZX.