Earnings from the company's real estate business were significantly back from the buoyant market of recent years. Photo: Supplied
Negative sentiment among rural real estate buyers has seen PGG Wrightson's half year profit dip from the record high reported last year as the company warns of a challenging year for the agriculture sector.
Key numbers for the six months ended Dec 2022 compared with a year ago:
- Net profit $21.2m vs $22.5m
- Revenue $586m vs $552m
- Operating earnings $47.8m vs $47.4m
- Dividend 12 cents cents a share vs 14 cents
PGW Chair Joo Hai Lee said on the heels of an "extraordinarily good" financial year, he was cautious for the year ahead, with the damage of Cyclone Gabrielle still to be assessed and rural confidence sitting at some of the lowest levels since surveys began.
"Our clients are experiencing an environment with rising interest rates, tightening credit, increased input costs, labour shortages, supply chain disruption, an uncertain geopolitical and domestic regulatory landscape, and adverse weather events including the extraordinary impacts of Cyclone Gabrielle that have hit the agricultural and horticultural sectors hard over large parts of the country.
"The full effects of these dynamics are yet to be assessed," he said.
Lee said the low morale had affected the company's real estate sales as the agriculture sector faced a myriad of challenges including rising interest rates, the decline in property demand and sales, mismatch of vendor-purchaser expectations, shrinking buyer pool, and a number of regulatory challenges coming to the rural sector.
"As a result, earnings from our real estate business were significantly back from the buoyant market seen over recent years and this explains the majority of the reduction in earnings for the agency operating segment."
He said residential and lifestyle sales experienced a significant slowdown throughout all markets.
Lee said the company was looking at how it could support its rural clients and communities as they moved into the recovery stage after Cyclone Gabrielle.
The company has donated $30,000 to the Rural Support Trust and was working with industry groups in the response and cleanup efforts, Lee said.
"Despite the initial shock at the scale of the devastation, we know that the fabric of our rural communities is strong and resilient and we will stand with you as these challenges are faced as they have been in the past."
Guidance update
The PGW Board revised its forecast full year operating earnings in response to the volatility in the macro operating environment.
"As we think about the outlook for the financial year to 30 June 2023 we do so with the benefit of a strong trading performance over the first half with PGW well positioned to capitalise upon the opportunities ahead," Lee said.
"On balance, the PGW Board's outlook remains cautious.
"We see some softening based upon the macro factors outlined and accordingly have recalibrated our forecast Operating EBITDA guidance for the financial year to 30 June 2023 at around $57 million."
The company had previously forecast its full year operating earnings to be $62m.