PGW - PGG Wrightson

[iceman]

Interesting to take information from this 'Heartland' article and combine it with information in your 'Scoop' referenced article.

The Heartland article shows beef prices down around 7% on a year ago and lamb prices down about 10%. The Scoop article says that revenue from the red meat sector is up 7% on last year. That means the number of cattle slaughtered year on year. That means the number of cattle slaughtered this year is up by approximately : 1.07/0.93 = +15% and the numbers of lamb slaughtered is up approximately : 1.07/0.90 = +19%. That is a very large increase in the number of animals slaughtered year on year. I suspect drought was the key reason stock slaughter was brought forward, But such action will have a consummate negative effect in the ensuing year,

A deluge of rain after a drought is all very well. But soil temperatures still have to be high enough for the grass to grow and in the South Island this isn't happening.

China took 24% more value in beef exports from us in the June year (Scoop). But beef consumption is very low in the Chinese summer (Heartland). So we are currently in a limbo land wondering if such record consumption will be sustained. At the height of the Chinese summer beef consumption is down 13% (Scoop).

I joked in a previous post about grinding down our high quality meat to make burgers. I was somewhat perturbed to read in the Heartland article that this is actually happening; mixing in our beef, as a way to make low cost high fat US grown beef palatable in burger patties.

SNOOPY

This from SFF marketing update yesterday:
"Beef
Activity is subdued in the US market due to the large domestic kill, as processors catch up on a backlog of cattle that built up during Covid-19 shutdowns.
Domestic demand for beef in the US remains firm which is keeping the market stable for both domestic and imported lean grinding beef.
Australian exports for July were down 23% compared with 2019, as Australia enters a cattle rebuilding phase after a prolonged drought.
Globally our value-added programmes have been performing well and gaining mainstream attention, as health and food safety is at the
forefront of consumers minds.
Our bolstered relationships with New Zealand retailers are paying off, and we’re seeing strong demand for chilled beef as domestic
consumers continue to embrace cooking at home.
The European market has improved with very good outlook for chilled steak cuts. Unfortunately frozen steak cuts are not as
buoyant. The high exchange rate continues to balance any market positivity"

[kiora]

Some surpluses around
https://finance.yahoo.com/news/u-far...135907536.html

[Snoopy]

Some surpluses around
https://finance.yahoo.com/news/u-far...135907536.html

Huh? The article talks about a reduction in new plantings in the USA of corn due to a Coronavirus induced reduction in demand for motor fuel and less soy being planted due to worries about the USA-China trade relationship. So it is saying that surpluses have been removed. Not sure what point you are trying to make re PGW operating in New Zealand. A somewhat confused...

SNOOPY

[Roberto the Brickie]

I have increased admiration of the accountants at PGW and wonder if they read this forum. I have raised the question of what is $4.5 million of non operating expenses in the 2019 annual report, but now notice that this figure is not showing in the 2019 comparative figures of the 2020 result. Looking further I see they have netted the gain from over provisioning of the Holidays Act with this expenditure. Well done to the PGW accounting team as a way of deflecting this question.
Looking at the 2020 result it is as expected, I am still happy with my shareholding in this company. My one slight concern would be cash management. Why have $16 million in cash and yet have debt?

[percy]

Thought the result would not be great, so sold most of my holding yesterday.
As the result was worse than I expected, and with no divie, I sold the balance of our holdings this morning.

[Snow Leopard]

Thought the result would not be great, so sold most of my holding yesterday.
As the result was worse than I expected, and with no divie, I sold the balance of our holdings this morning.

I do not understand.
Why did you not sell on or soon after 22-July when they first told us what the result would be ?

[percy]

I do not understand.
Why did you not sell on or soon after 22-July when they first told us what the result would be ?

Took my eye off the ball.

[Balance]

Took my eye off the ball.

Think BAIC have their eyes off the ball too?

Or are they getting ready to pounce?

[Snoopy]

Think BAIC have their eyes off the ball too?

Or are they getting ready to pounce?

The narrative is playing out as I expected. PGW deliver a bad result and a doubtful outlook. Shares get sold down. BAIC rides in to 'save' shareholders from their losses by offering a 'very generous' $2.75 per share, as pre-agreed with David Cushing. And having sold all his shares, for $2.75 no less, David is the best qualified 'fully independent director' to recommend such an offer. Alan Lai makes his gracious exit. Other shareholders, if they have any long term vision of where agriculture is going in NZ, won't.

SNOOPY

[Snoopy]

The $235m capital repayment we shareholders got was well down on the $292m proposed in the Korda Mentha report (detailed on p36). I would have thought the suggested capital repayment we didn't get would have boosted the PGWRR balance sheet to the extent that all medium term worries were removed. Yet, somehow millions of dollars worth of capital must have been leaking from PGW in recent years, out of the headline sight of shareholders, to bring them to the precarious capital position that PGW is in today. So how did it all unfold?

Year 2020 forecast equity ratio is 46%. Very sound.

Actual Equity Ratio at balance date: Total Equity / 'Total Liabilities + Equity' = $156.702m / $459.453m = 34% "Not so Sound" Hmmmm.

SNOOPY