PGW - PGG Wrightson

[freddagg]

How costly will the wrong Swede seeds fiasco be to PGW.?

Here are some estimates of losses based on the only information I have seen which is that 556 farms are involved.
How much of that PGW will be liable for I do not know.

556 farms at say 10 hectares each = 5560 hectares.
Average crop 15000 kg dry matter per hectare worth 40 cents a kg fed to a dairy cow = $33.3 million worth of crop
Since it is not suitable for dairy cow feed the value of the crop is likely halved giving a loss to farmers of $16.7 million.

[percy]

Here are some estimates of losses based on the only information I have seen which is that 556 farms are involved.
How much of that PGW will be liable for I do not know.

556 farms at say 10 hectares each = 5560 hectares.
Average crop 15000 kg dry matter per hectare worth 40 cents a kg fed to a dairy cow = $33.3 million worth of crop
Since it is not suitable for dairy cow feed the value of the crop is likely halved giving a loss to farmers of $16.7 million.

Thank you.

[Sideshow Bob]

For a company that made $46m net profit last year - it is likely to be significant.

Results due Tuesday coming - will be interesting to see what commentary they have around the issue.

[Sideshow Bob]

Glance over gives reasonably positive reading. Best 1HY in a decade.

[Agrarinvestor]

Do you, or anyone else understood who has aked a question about Agria, at the end of the conference call?

[iceman]

Do you, or anyone else understood who has aked a question about Agria, at the end of the conference call?

Agrarinvestor, there is an article written by Tim Hunter behind the paywall in the National Business Review today https://www.nbr.co.nz/opinion/stage-...-pgg-wrightson
The headline is "What's going on at PGG Wrightson". It talks about a transfer of $10 million between related parties of Softpower International in Hong Kong. I think you will find the article interesting to read but you may have to buy a 1 month subscription. Anyway, thought I'd let you know as you are obviously following these developments closely

[Snoopy]

Agrarinvestor, there is an article written by Tim Hunter behind the paywall in the National Business Review today https://www.nbr.co.nz/opinion/stage-...-pgg-wrightson
The headline is "What's going on at PGG Wrightson". It talks about a transfer of $10 million between related parties of Softpower International in Hong Kong. I think you will find the article interesting to read but you may have to buy a 1 month subscription. Anyway, thought I'd let you know as you are obviously following these developments closely

Alan Lai has long had an interest in trading pipes and plumbing supplies in Hong Kong, via a company called 'Brothers Capital Limited' that controls 'Softpower' (http://www.softpower.hk) the plumbing suppliers. 'Brothers Capital' is not by co-incidence also the controlling entity of 'Agria Corporation'. The fact that this company 'Softpower' is now described as an 'investment company' as well is a bit of a surprise to me. Softpower’s main businesses include "the wholesaling, retailing and logistics operation of pipes and fittings in Hong Kong and Macau". I am guessing that describing 'Softpower' an investment company legitimizes transfers of capital from one 'Brothers capital' controlled entity to another?

The up to $US10m loan to Softpower as referred to by NBR's Tim Hunter (http://www.aastocks.com/en/stocks/ne...87/latest-news) seems to have been set up originally on 12-05-2016. 'China Victory International Holdings' was the lender. But after the more recent Softpower transaction (proposed 05-02-2018, voted on 23-02-2018) (http://www.softpower.hk/UserFiles/Fi...94d3e48b8e.pdf) it seems that Agria is now the lender to Softpower. At least Agria should be getting a good return for taking over this loan!

"The interest rate for each interest period shall be prime rate plus 7% per annum."

The net effect of this 'loan transfer' looks to have strengthened the positive cashflow into Agria. But this impression would be wrong. 'China Victory International Holdings' was already an Agria subsidiary, whose operating asset is "an enterprise established in the People's Republic of China principally engaged in the research production and marketing of corn seeds." So all that has happened is that the loan has been transferred from a subsidiary of Agria Group to the parent. Why this was done is unexplained. But it does mean that the potential sale of these Chinese assets by Agria has become an easier task.

If we look at the declared historical debts of Agria, we must consider that PGW is a full subsidiary of Agria, So the PGW debt is consolidated into the Agria accounts. To get the true underlying debt position of Agria, we have to take out the PGW debt. The last date for which this was declared for both companies was FY2017 balance date (30-06-2017). The figures in the table below are a snapshot from that date.

Agria Corp USA report filings can be found here:

https://www.last10k.com/sec-filings/gro

(Note 15 in Agria 20-F net interest bearing debt was $US117.823m)

Balance Date 30-06-2017	NZD	Exchange Rate (30-06-2017)	USD	Reference
Agria Net Interest Bearing Debt			$US117.823m	Agria 20F filing FY2017, note 15
PGW Net Debt	$NZ128.241m	0.7330	$US94.000m	PGW AR2017, note 10
Underlying Agria Debt			$US23.823m

Tim Hunter highlights the $US25.8m former 'New Hope' 'shareholding' - representing 12% of the company 'Agria Asia'. That shareholding 'New Hope' sold back (date 30-06-2017) to 'Agria Corporation' (the formerly listed US parent of Agria Asia) -was also a defacto paying back of a loan, if you consider the 'supplemental agreement' that was attached to it.

" Under the supplemental agreement, Agria Group agreed to provide a guarantee to New Hope International for a minimal level of dividends to be distributed by Agria Asia Investments to New Hope International." (p19, 20F filing for Agria for FY2017)

I got the impression at the time that New Hope was always a 'headline shareholder', brought on board to bring more legitimacy to Agria's operations, because of 'New Hope's connection to the Chinese government. The 'New Hope' 'shareholding' seemed to be more akin to a preference share arrangement with regular cash payments from Agria to New Hope being required.

Alan Lai's selling down of 25% of his 'Softpower' stake on 25-01-2018, raised $US15.4m ($HK120m, converted at $US1- $HK7.818), an amount that if shifted to Agria could go a long way to paying back 'New Hope', albeit belatedly (the sell down by New Hope was some time ago on 30-06-2017). But there is no reason that Alan Lai should shift this money to Agria.

I was at last years PGW AGM and got quite a different impression of PGW's proposed 'capital review' to that of Tim Hunter. I certainly didn't see such talk as referring to Agria's PGW stake. The comment at the AGM was made IIRC, in the context of selling surplus property to reinvest in the PGW business over FY2017. Now that nearly all surplus PGW property has been sold, my take was that raising new capital to continue to invest in the PGW business was to be looked at seriously. Could it be that Alan Lai is simply positioning himself, via the Softbank share sale, to take part in a small upcoming cash issue at PGW without diluting/losing Agria's 50.1% controlling stake in PGW? Perhaps I am naive. But I don't see anything sinister in these 'behind the scenes' transactions, highlighted by Tim Hunter, involving Mr Lai's holding companies.

SNOOPY

[iceman]

All way to messy for me Snoopy. Happy to have sold out completely some months ago and no intention to reinvest

[Snoopy]

All way to messy for me Snoopy. Happy to have sold out completely some months ago and no intention to reinvest

I have rewritten my 'Softpower Connection' post because I couldn't understand it. This was a bit of a worry, considering I wrote it! So what was 'unfathomable' has now become only 'mildly incomprehensible'. I think I have the implications right, but would welcome any other thoughts on the matter.

I agree that 'behind the scenes' at PGW sounds confusing, but none of this effects the underlying business at PGW itself. It is just like if you 'iceman' did not return from one of your many visits to the South Pole, when you were still a shareholder. Very sad for friends and family it would be no doubt. But ultimately your shares would be disposed of with no effect on the day to day running of the business. Exactly the same situation applies to Mr Lai's stake. I have tried not to think about the Agria stake implications for the last couple of years (that is until Tim Hunter brought it to the forefront again) and it has worked for me.

Sorry you are not still a shareholder. I still see PGW as a good 'set and forget' rural sector investment with a great dividend yield.

SNOOPY

[winner69]

Pgw on the block ...looking for buyers ...sharechat.co.nz