PGGW adjusts performance downwards

PGG Wrightson has substantially downgraded its earnings (net operating profit after tax) guidance for the 12 months to June 30, blaming the impact of the global recession on the rural sector and a slowdown in the dairy industry reports The Dom Post. The rural services firm today said it had reviewed its operating earnings guidance for the fiscal year, based on outlook and financial performance and believed that net operating earnings were likely to be within the range of $30 million to $32 million.This was compared to previous guidance of a range from $36 million to $42 million which came after $2.5m of debt-related costs. PGGW's board anticipated that initiatives undertaken by management would help improve 2009/10 net operating earnings, now expected to be in a range of $33 million to $39 million. Managing director Tim Miles, in a statement, said the key factor in PGGW's trimmed outlook for the 2009 year was the impact of the global recession on the rural sector and a significant recent slowdown in dairy activity during the peak trading period.During the first half of the financial year, PGGW recorded a strong operating result reflecting the resilience of the agricultural sector. ''However, earnings are heavily weighted towards the second half-year and market conditions both here and overseas have become significantly tougher as the recession deepened and farmer confidence deteriorated,'' Miles said. ''This has been particularly apparent in the current quarter with dairy farmers in both New Zealand and Australia exercising extreme caution in their expenditure commitments.'' While the international agricultural sector outlook overall remained robust, the ongoing global recession andFonterra's recent announcement regarding its reduced payout are dampening farmer confidence restricting spending in the autumn season. Sheep and beef farm incomes had improved to their best levels in recent years, however this had not yet been reflected in expenditure which has been kept to a minimum given the past poor returns, Miles added. As previously reported, net earnings for the year ending 30 June 2009 would also be affected by non-trading items including any further writedown in the value of the 11% shareholding in NZ Farming Systems Uruguay; the marking to market of interest rate hedges under international financial reporting standards, adjustment of defined benefit superannuation scheme surpluses, and costs associated with the settlement of the partnership agreement with Silver Fern Farms.