PGW - PGG Wrightson

[Snoopy]

I have read in several sources that price for corn has raised about 20% percents because of US drought. Will this also be true for seeds?

PGWs principal lines of seeds for sale come under the heading 'grass', despite the recent Australian diversification you note Agrarinvestor.

On p13 of PGW AR2011, there is comment to the effect that wet weather produces an abundance of grass that in turn reduces the demand for new seed. When the weather is very wet the ground becomes too boggy to resow pasture. The HY2012 forecast was for a year slightly wetter than normal. Taking all that together I am not expecting a good performance from the PGW NZ seeds business in FY2012. But with results due to be released in a couple of weeks it will be interesting to see if my suspicions are confirmed.

In general I don't believe that looking at the corn price will give guidance to the profitability of PGW Agritech.

SNOOPY

[Snoopy]

I have read in several sources that price for corn haas raised about 20% percents because of US drought. Will this also be true foor seeds ?
PGW has aquired Corson, a austrailian based producer of maize seeds and Keith seeds also australian based. Does anybody know how much revenue will be generated out of this business ?

There is limited information in the annual report, so I am going to indulge in some dubious numerology.

End of year inventory for Corson is listed as $494k, say $500k (PGW AR2011 p69). Multiply that my 12 to get annual inventory and I get $6m. Because seeds are a seasonal business it is unlikely that this calculation is correct, as presumably the June inventory reflects the stock build up in anticipation of spring sales. So $6m in sales is likely an overestimate of actual annual sales, which I will nevertheless stick with for this exercise.

If all of the 20% increase in corn sales is realised as extra profit (probably unlikely), then that might amount to $1.2m. Divide that by the 754.8m shares on issue. That means the increase in eps from a higher corn price, assuming constant sales levels from FY2011 amounts to an increase in profit of:

$1.2m/754.8m = 0.0016cps

That doesn't do much for my excitometer.

Keith Seeds is a much bigger business (end of year stock on hand $1.798m). Keith's specialize in pasture, oil seed a variety of legumes and birdseed. They were loss making when acquired. I wouldn't like to speculate as to whether PGW has made any progress in turning things around at Keith Seeds.

SNOOPY

[Snoopy]

Hi, i am sure that Agrias management is not nervous to get the share price over 1$. Just look at he Chart and look for the jump in July 2011. I have watched the trades every day, since 3 month, the decline was possible because Agrias IR has not released any news and nobody pays attention to AGRIA.

But we all know that AGRIA as the main shareholder have to consolidate the results of PGW in their earnings.
And if PGW is succesful, Agria will benefit.

There is a key difference between FY2011 and FY2012. Come January Agria has some significant debt to refinance and they have made a massive loss on their PGW investment to date. If you were a banker, would you refinance Agria given they have lost the income stream they had from the PGW debt instruments which have been repaid by PGW?

SNOOPY

[Agrarinvestor]

There is a key difference between FY2011 and FY2012. Come January Agria has some significant debt to refinance and they have made a massive loss on their PGW investment to date. If you were a banker, would you refinance Agria given they have lost the income stream they had from the PGW debt instruments which have been repaid by PGW?

SNOOPY

Yes i would lend them money. The shareprice of PGW isn't important for Agria. If PGWs shareprice would double it has no impact on the balance sheet nor on the income. Shareholder assets are worth 224 million, market cap is 50 million.The shareholder assets are already reduced of the debt.. That means they could loan more than 200 additional millions. But you talk only about refinancing, so i can not see smallest problems in that area. See statement of the SVP.

http://finance.yahoo.com/q/bs?s=GRO+...e+Sheet&annual

My concerns are more about revenue and earnings of PGW. That is the key factor for PGW and Agria!

Keith Seeds and Corson seems to be only peanuts, thanks for you investigation.
Hopefully PGW has good reasons for that aquisation.



David Pascaöe, SVP of AGRIA:
>>In terms of your questions on, PGG Wrightson, Agria consolidates PGG Wrightson's results and then backs out the non-controlling portion. A declining share price does not impact such treatment on the income statement nor would it on the balance sheet. It would impact the valuation if there was some type of liquidity event. It would also impact the share valuation of Agria as investors tend to look for arbitrage opportunities buying shares of Agria if the underlying PGG asset is worth more than the implied value of shares of Agria. The investment by Agria and partnership with PGG has been and remains mutually beneficial, positive and productive. As the markets improve, we are confident the company will be more properly valued. Thank you for your continued support, David<<

[Master98]

The chinese buyer of crafar farms has cleared the last hurdle, so pgw 100% sure get the money back from the loan to crafar, it is all good.

[Agrarinvestor]

The chinese buyer of crafar farms has cleared the last hurdle, so pgw 100% sure get the money back from the loan to crafar, it is all good.

I have read through annual report because of the loan to crafar, but I could not find anything about.

[tim23]

I think Wrightson held on to iffy loans while good loans went with finance book to HNZ so sale is good news.

[Snoopy]

The shareprice of PGW isn't important for Agria. If PGWs shareprice would double it has no impact on the balance sheet nor on the income.

Short term you are right. Come the end of the financial year international accounting rules require all listed investments, including PGW, to be marked to market.

On June 30th 2011 the PGW share price was NZ47c or US38.41c (based on $NZ1= US81.73c)

On June 30th 2012 the PGW share price was NZ30c or US23.88c (based on $NZ1= US79.61c)

This is a loss of US14.53cps, or $US54.8m (based on half of the 758.4m PGW shares on issue) that was booked into the Agria accounts that closed off on 30th June 2012.

SNOOPY

[kiwi_on_OE]

There is limited information in the annual report, so I am going to indulge in some dubious numerology.

End of year inventory for Corson is listed as $494k, say $500k (PGW AR2011 p69). Multiply that my 12 to get annual inventory and I get $6m. Because seeds are a seasonal business it is unlikely that this calculation is correct, as presumably the June inventory reflects the stock build up in anticipation of spring sales. So $6m in sales is likely an overestimate of actual annual sales, which I will nevertheless stick with for this exercise.
SNOOPY

Dubious numerology - yes, we don't know what their inventory turnover is. They may sell a large chunk of it each month, or hardly any of it.

Having said that, my excitometer is sufficiently low that I can't even be bothered to guess at other numbers, nor work out what sort of profit they may make this year.

[Agrarinvestor]

Short term you are right. Come the end of the financial year international accounting rules require all listed investments, including PGW, to be marked to market.

On June 30th 2011 the PGW share price was NZ47c or US38.41c (based on $NZ1= US81.73c)

On June 30th 2012 the PGW share price was NZ30c or US23.88c (based on $NZ1= US79.61c)

This is a loss of US14.53cps, or $US54.8m (based on half of the 758.4m PGW shares on issue) that was booked into the Agria accounts that closed off on 30th June 2012.

SNOOPY

@snoopy,

we had already financial year end . You are saying that Agria has a loss of 54 Million because of the declining shareprice. That means that the senior vice president of Agria is lying to me, or do i have misinterpretet his statement ?

David Pascaöe, SVP of AGRIA:
>>In terms of your questions on, PGG Wrightson, Agria consolidates PGG Wrightson's results and then backs out the non-controlling portion. A declining share price does not impact such treatment on the income statement nor would it on the balance sheet. It would impact the valuation if there was some type of liquidity event. It would also impact the share valuation of Agria as investors tend to look for arbitrage opportunities buying shares of Agria if the underlying PGG asset is worth more than the implied value of shares of Agria. The investment by Agria and partnership with PGG has been and remains mutually beneficial, positive and productive. As the markets improve, we are confident the company will be more properly valued. Thank you for your continued support, David<<