PGW - PGG Wrightson

[Roberto the Brickie]

Sorry Snoopy, I will re ask my question. Do you believe the payments to Ian Glasson of $2.3 million in addition to his to base salary are included in operating expenditure or non-operating expenditure in the published 2019 annual report?

[Snoopy]

Sorry Snoopy, I will re ask my question. Do you believe the payments to Ian Glasson of $2.3 million in addition to his to base salary are included in operating expenditure or non-operating expenditure in the published 2019 annual report?

Neither. I would think Ian Glasson's $2,332m payments above base salary would be classified under 'Employee Expenses'.

Of course the seeds division, despite the branding, is no longer owned by PGW. That's why they moved out to a new premesis. As you observed that would leave plenty of space at Waterloo road. I don't know why 'PGW Rural Rump' left Waterloo Road. It may have been the lease was up. It may have been new CEO Steve Guerin wanting to stamp his mark on the business. It may be that the Christchurch International Airport park offered them a great rental deal. The move was all pre Covid-19. So it could be that Stephen was expecting a constant stream of representatives from overseas suppliers that he had to meet and entertain. It would be easy to do that from the Airport premesis with the Sudima hotel across the road. And of course Chrischurch Airport is a good access point if you are regularly flying around the country checking out your subordinates, or alternatively if you need to summon them to head office!

With the sale of the Australian and Uruguayan arms, executives will no longer have to travel between those countries. Some of the $2.5m annual savings will come from that. That August review that you commented on said the findings were being implemented. It didn't say the review itself was ongoing.

As for the position of 'commercial manager' for the Agency 'division'. That doesn't sound like a head of department job to me. 'Agency' is a creation of a previous CEO Mark Dewdney, aka 'The Dude'. Agency combines 'Livestock', 'Real Estate' and 'Wool' which are really quite disparate business segments each with their own head. To me 'Commercial manager' sounds more like a mid level accounting job to figure out how to streamline the reporting from these three disparate entities come reporting time. It doesn't sound like a 'head of the whole Agency shebang' . I am expecting Agency to have had a dismal year when the divisional results are released. So when someone asks Stephen at the AGM what he is doing about it, Stephen can say: " I have just hired a new commercial manager.'

Anyway I am not sweating on the $2.5m+ cost reduction figure just yet. I too would have expected some downsizing of the management team at the head table, more than is obvious today. But sometimes it is better to just let these people work out their contracts, rather than get into employment disputes. I look forward to your tough questioning of Stephen at the upcoming AGM!

SNOOPY

[DDog]

The Commercial Manager is not a new role but one that has been around for many years. The current one is moving to a new challenge. But as you say, the Commercial Manager is the accountant for the three business units. He supports the GMs in all things accounting and commercial. The accountants report to the Commercial Manager. There is also a Commercial Manager for Retail & Water.

[Roberto the Brickie]

Sorry but now I am getting a little bit confused. Several questions probably due to a couple of assumptions that I have been making.
1. I thought PGW changed to segmented reporting to pass out Corporate costs a couple of years earlier. So costs for Australian and Uruguay expenses related to the now sold Seeds division, so no savings for remaining Rural Rump.
2. The commercial manager role for Agency is paying greater than $200k in the advert on Seek. If that is a mid level accounting job then I really made a crappy career choice when I left school. Maybe Mum and Dad were right after all.
3. If the "additional" payments to Ian Glasson above his base salary are included in Employee expenses, what is the amount of $4.5 million as Non-operating expenses?

I purchased shares in PGW last year for the dividends and from reading that they could reduce Corporate costs due to restructure of $2.5 million being an increase in EBITDA of 10% that would be ongoing over years. This would be a way to continue providing that dividend stream and not a saving for one year. Nowhere in their announcements did I get the impression it was a one off saving.
Sorry will not be attending the AGM, travelling back to NZ for an AGM and isolating for a month is not enough incentive to visit home. Hopefully the Shareholder's Association or someone attending the AGM will ask about the $4.5 million spend. Results for 2020 year must be due shortly which may help understand that spending.

[percy]

Result will be released at 8.30 am on Tuesday 18th August.

[Snoopy]

Sorry but now I am getting a little bit confused. Several questions probably due to a couple of assumptions that I have been making.
1. I thought PGW changed to segmented reporting to pass out Corporate costs a couple of years earlier. So costs for Australian and Uruguay expenses related to the now sold Seeds division, so no savings for remaining Rural Rump.

PGW has had segmented reporting since -forever- I think. The Australian division has always been 'seeds only'. The Uruguayan business was both seeds and 'rural supplies'. The Danish outfit that purchased it all seemed happy to take the rural supplies business in Uruguay as well. But when it was all 'One PGW' all the businesses were under a single corporate umbrella with the pointed tip at the top being 'Pharaoh Ian'. At that point PGW was a complex kingdom, requiring many bureaucrats to keep the wheels running. They had to keep tabs on international tax regimes and worry about inter country borrowing and currency hedging. At the high level, a lot of time would have been put into into evaluating the business potential of overseas business units that were still years away from producing specific cultivars that would lift these overseas business units out of their commodity bottom of the bathtub price bases. It is by getting rid of these corporate umbrella roles, specific to looking after those overseas businesses, that I understood to be where the $2.5m in corporate savings was coming from.

2. The commercial manager role for Agency is paying greater than $200k in the advert on Seek. If that is a mid level accounting job then I really made a crappy career choice when I left school. Maybe Mum and Dad were right after all.

Yep, you should have listened to your Mum. Although having a career that gives you a lesser income but more enjoyment and a better work life balance has something to be said for it.

3. If the "additional" payments to Ian Glasson above his base salary are included in Employee expenses, what is the amount of $4.5 million as Non-operating expenses?

Payments to consultants connected with the seeds division split. Fees associated with renegotiating funding with PGW's banking syndicate. Expenses incured in recruiting new high level staff. Legal expenses figuring out how to break Pharaoh Ian's long term employment contract. Stuff like that. It is possible that Ian's 'break fee', however that is defined, is included as a non-operating expense. I can't be absolutely sure.

I purchased shares in PGW last year for the dividends and from reading that they could reduce Corporate costs due to restructure of $2.5 million being an increase in EBITDA of 10% that would be ongoing over years. This would be a way to continue providing that dividend stream and not a saving for one year. Nowhere in their announcements did I get the impression it was a one off saving.

All jesting aside, I do believe the $2.5m in savings will be ongoing. But if you think rurally based shares will give you a 'steady income' you need to think again. All the rurally based shares that I can think of have their and downs. I adjust for that before I invest by seeking a relatively greater dividend yield over the business cycle.

SNOOPY

[percy]

http://business.scoop.co.nz/2020/08/...-year-on-year/

[Snoopy]

http://business.scoop.co.nz/2020/08/...-year-on-year/

A glaring omission in that article was that the word 'drought' was not mentioned. If you don't have enough feed to get your stock through the winter then you arrange to have them killed before winter arrives. So it is no surprise that red meat exports are on the up in the year to June 2020. Come this year those cash strapped farmers will need to rebuild when funds allow. That means lower trade through the PGW livestock division as farmers breed up their own replacement stock and the discretionary spending power of farmers coming under real pressure will be felt a PGW Retail. The issues highlighted in this article are not good news for PGW shareholders!

SNOOPY

[percy]

https://www.heartland.co.nz/rural-lo...-market-update

[Snoopy]

https://www.heartland.co.nz/rural-lo...-market-update

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