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Tough start expected for PGGW

Rural News
Tough start expected for PGGW

Flagging farmer confidence last year will likely lead to a muted interim half-year result for PGG Wrightson on Thursday. The rural property market has taken a hit over the last 12 months with sales dropping coupled with an increase in mortgagee sales. Also last year, the Reserve Bank warned lenders about providing too much debt to the farming sector and many of the rural banks tightened their lending criteria over the last six months as a result reports The NBR. This was partly because banks are more exposed with farming debt and because of an international push for banks to hold more capital and be less leveraged. In short, it became more expensive for farm lending. According to Forsyth Barr analyst John Cairns this contributed to farm confidence hitting a low ebb during the six months to December 31 with difficult trading conditions for the rural services and supplies company. He said it seemed guidance provided at the time of PGGW's recapitalisation late last year of earnings before income tax around the low $70 million mark, was probably on track. In the company's interim results last year, the company posted a $32.8 million loss. This included a $35.2 million writedown of its stake in New Zealand Farming Systems Uruguay; a $9.3 million loss on marking to market its currency and interest rate hedges; and $17 million in costs relating to the failed Silver Fern Farmers takeover.

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