PGW - PGG Wrightson

[Snoopy]

What nonsense from our resident Eeyore. My own investigation, involving actually speaking to senior managers at Agritech (not the tealady), suggest the integration of the Australian business units was poor initially but is coming together nicely across late 2012 and 2013.

The move from GM of a division to CEO of NZ's largest farming company is a huge promotion for an individual.

Sparky, I refer you back to my Thread post 1958, dated 12th April 2012. There you can see what has happened since Mr Carden came on board at Agritech. The summary is, turnover has steadily increased while profit after tax has slid away to virtually nothing. Of course this view of Agritech includes all of the New Zealand operations as well, which reputedly have been doing quite well. So to basically destroy the profitability of Agritech in total by going on the acquisition trail of stray dogs in Australia must have taken some skill.

May I suggest next time you interview your PGW high level manager you do speak to the tea lady as well. She doesn't get paid enough to lie.

I have to admire your conviction, but am not convinced that 'pin the wail on the donkey' is a successful investment strategy.

SNOOPY

[Snoopy]

Snoopy! Why not just cut your losses and get out??

QStF, I still see PGW as an effective way to plug into the rural sector. In my experience the rural sector is often out of line with the rest of the market. Thus when almost everything else is sitting at multi year highs, I tend to gravitate sectors that are merely overpriced to averagely priced.

Successful investing in the rural sector is IME very much a case of not paying too much. So my strategy is to sit patiently and wait until the next market spook shows up. Alan Lai bumbling around in a white sheet before last years AGM was one opportunity. I expect there to be others. Thus I continue to watch PGW, and wait with my cheque book at the ready.

SNOOPY

[Snoopy]

Of course this view of Agritech includes all of the New Zealand operations as well, which reputedly have been doing quite well. So to basically destroy the profitability of Agritech in total by going on the acquisition trail of stray dogs in Australia must have taken some skill.

I note the half year report does not include a break down of geographical segment information as the full year report did. I don't think PGW gets any revenue from Australia that is not Agritech. So if Australian revenue was $78.798m in FY2012 (AR2012 p48) and South American Agritech revenue was $96.227m (AR2012 p46) then that leaves the revenue for NZ Agritech as:

$486.464m - $78.798m - $96.227m = $311.439m

Looking at that you would think that a good year in NZ might be able to pull up by the bootstraps any wayward performance in Australia and South America. Yet this appears to not have been the case for any year since 2008. Would those defenders of Carden like to offer an alternative explanation that does not involve gross mismanagement in Australia?

SNOOPY

[Queenstfarmer]

Hang in there Snoopy....you may very well see your 60c sp and beyond before the fy13.

[winner69]

Then again Snoopy might say " wish those agriseed managers would stop wasting time talking to clowns and just get on with making money"

[GRIFFIN]

You will find most of us farmers have the seed in the ground now regardless of rain or temperature its a case of having too and now hope for good growing conditions.
Ravensdown, Ballance etc will be very busy at the moment as well.

[Snoopy]

Lai has a habit of talking up Agria's potential and capabilities, so forgive my cynicism.

Never have wiser words been written on this thread Sparky. Your cynicism regarding Lai is fully justified.

There is nothing wrong with a leader have a vision, drive and ambition. But every so often a leader needs to look over their shoulder, take stock, and reevaluate their plans in line with the reality of the market. I have done a couple of simple maths exercises on Lai's vision for PGW Agritech.

Last years sales were $NZ435m and that equates to around $US370m using $NZ1 = US85c. If in ten years the turnover is to be $US10 billion we can calculate the implied growth rate as follows:

$370m(1+g)^10=$10000m => g=39%

So Lai is predicting a growth rate for Agritech of 39% every year for the next ten years!

Next in forage he is saying that sales to China will be $US25m by 2017 (sales are nil at the moment). Then he is saying that six years later sales could be $US200m. So we can calculate the implied growth rate here:

$25m(1+g)^6=$200m => g=41%

From a nil base, Lai is predicting a 41% growth rate in forage sales going forward.

Now, I know that China is one of the fastest growing economies in the world. But even allowing for this I would say Lai's vision for the future of Agritech is not realistic.

SNOOPY

[Snoopy]

An interesting article by Fran O'Sullivan this morning about the Seeds business potentially joining up formally with Agria.

http://www.nzherald.co.nz/business/n...ectid=10875679

I am not sure whether to shoot the message, the messenger or the editor. But by some measure this is the worst piece of journalism I have read this year. The article contains contradictions and as a result does not make sense.

"Lai shared his vision for the seeds business at an interview in Auckland. "In three years we could be in the top 10 seeds companies in the world ".

Then later on in the article Lai says.

"With the combination between PGGW and China Seeds, we are number two in the world and we are looking in the next three years to be number one."

So what Lai is saying is that in the next ten years a combined PGGW Agritech and China seeds will slip backwards from number two to number three?

Then on talking about a Chinaseeds Agritech merger, Lai says:

"Post the merger PGG Wrightson would have less than one-third of the new company."

Then in the next paragraph Lai is quoted:

"Lai said Agria was prepared to adjust the 51 per cent (in the PGG Wrightson Seeds business) to bring more benefit back to the New Zealand firm. "

That looks to me like a direct contradiction to his previous comment about decreasing the relative holding of PGG Agritech in a future merged entity. Can anyone offer a coherent interpretation as to what Lai might mean by his comments?

SNOOPY

[Snoopy]

Alan Lai's comments are not aligned with that of PGW's management. I suspect PGW are as bemused as we are. Comments from useful and informed sources are describing Lai as a comical ego. However, he is not running PGW.

I hate to point this out Sparky, but Lai's Agria has a controlling shareholding in PGW. And this is the quote from the Herald article you referenced:

"Lai says the Chinese side has not intervened at management level since the asset was bought. But he indicated a desire to have a much bigger say in future strategy."

PGW's NZ based management may not have much of a choice as to where they go in the future, to the detriment of minority shareholders like us!

SNOOPY

[Xerof]

I hate to point this out Sparky, but Lai's Agria has a controlling shareholding in PGW. And this is the quote from the Herald article you referenced:

"Lai says the Chinese side has not intervened at management level since the asset was bought. But he indicated a desire to have a much bigger say in future strategy."

PGW's NZ based management may not have much of a choice as to where they go in the future, to the detriment of minority shareholders like us!

SNOOPY

I would love to see the minutes of the meeting at which the 'interim' dividend was voted on.

no intervention? Bollocks.