PGW’s game of two halves

The rural service trader last week announced a full-year net profit of $7.8m. That compared to a profit of $131.8m in the previous year, which was boosted by a $134.3m gain after the sale of its seeds business.

PGW says this year’s second half loss and global uncertainty around COVID-19 means it will not pay a final dividend. However, chairman Rodger Finlay says the board intends to resume the payment of regular dividends when the market stabilises.

For the year ending June 30, 2020, PGW’s operating earnings before interest and tax reached $45.2m. 

Its retail & water group’s operating earnings topped $35m on the back of solid performances by rural supplies business and Fruitfed supplies.

PGW chief executive Stephen Guerin says a booming horticulture sector helped the company’s sales.

“The horticultural sector has experienced good returns and yields and maintains a positive outlook.

“Our business is diversified across a variety of crops and continues to adapt to market needs with Fruitfed Supplies maintaining a strong share in grapes, pipfruit, stone fruit and kiwifruit, and we are increasing our presence in avocados and cherries which continue to see investment.”

Guerin says PGW’s livestock, wool and real estate business – known as the Agency Group – was hit hard by the COVID-19 lockdown between March and May.

Operating earnings for the Agency Group were only $8.4m compared to $15.9m for the previous year’s comparative period.

“Our livestock business experienced a strong first six months, underpinned by buoyant livestock trading volumes and values,” Guerin explains.

“In the second half of the year, widespread drought conditions resulted in high demand and a shortage of processing capacity.”

Guerin says COVID-19 impacted international market supply chains and further restrictions on processing capacity were implemented when the country went into Level 4 lockdown. 

“These events, together with the significant impact caused through the temporary closure of saleyards under Level 4 and 3 lockdowns, had a significant impact.”

PGW continued to operate during the lockdown as an essential service. The company received $4.1m through the government wage subsidy scheme.

Finlay claims while the 2019-20 result “was not what we had targeted at the start of the year”, it nevertheless reflected well on the resilience of the business. 

“To deliver a trading performance similar to last year, after the level of disruption that we have experienced, is heartening and demonstrates that the business is in good health.”

Finlay praised PGW staff for stepping up and continuing to serve customers through the various stages of lockdowns.

“Our team adapted quickly and a number of our business units traded right through this demanding period and as a group, PGW has recorded a very credible operating result.”

He believes for the company to be trading in line with the prior year is positive when PGW’s real estate, water and wool businesses, along with its livestock saleyards, were effectively unable to operate for the duration of the lockdown.

Commenting on the outlook, Finlay says while there is scope for optimism with good demand and commodity pricing for New Zealand export produce, there remains a degree of caution with continuing volatility in global markets.