PGW - PGG Wrightson

[BlackPeter]

It looks like a good strategic fit to me mate and I am happy to take their NZX release stating this acquisition has had strong growth at face value. Surely a man with your experience can see the obvious synergies !!

Hi Roger (et all). Agree they talk synergie, which must be a positive word (but then - it is probably as well the most abused word in the vocabulary of any CEO justifying anything they don't have a business case for) and yes, from the sound of it it might make sense and was hopefully not too dear. It's just that PGW had in its past spectacular examples for failing to do proper due diligence before jumping into the deep end (Silverside, NZS to name just a few) and obviously executives who might want to catch up with friends in Uruguay from their NZS phase. So I guess it would be nice to get this announcement with a bit more spice (data) instead of just hoping that they did this time a better job in analysing the opportunity.

I am sitting so far on the fence re this "opportunity" - and hope they don't disappoint again ...

[percy]

I think PGW has been transformed back to a well run organisation, providing excellent products and services to their customers.
They are customer focussed.Having had a "tight" balance sheet,upgrading the business has meant they have had to reinvest with caution.
I would therefore think, any acquisition has been very carefully analysed.I have noted in my travels around Canterbury, PGW branches have been spruced up.In fact they are looking good. Could be said the business is "well positioned."

[Snoopy]

Again there has been a slight shift in the reporting details for FY2014. Profitability figures for South America are no longer quoted. I am always suspicious when detail like this disappears from a report, and ask the question:

"What have management got to hide?"

Note 4 does report the revenues though: down from $NZ118.674m (FY2013) to $NZ110.880m (FY2014). Uruguay and ultimately Brazil has always been the add on with potential. South America is of course small, only 10% of sales and rather less than that in profits, in the grand scheme that is PGW now. But IMO those South American sales figures are a disappointing result. I predict PGW will continue to 'stumble along' in South America, as it has for ten years, with no increase in eps coming from there in FY2015. With the growth engine stalled, that is enough to remove any growth premium for the PGW share price going forwards IMO.

I wrote the above nearly a year ago. So I am quite pleased to see progress in South America. My only doubt is with 'Agrocentro Uruguay' being both a major supllier to PGGW in Uruguay.

"PGG Wrightson Seeds has been a key strategic partner and has supported Agrocentro Uruguay from its conception. Agrocentro Uruguay is PGG Wrightson Seeds’ largest customer in South America. It is also the biggest seed producer for PGG Wrightson Seeds and an important seed processor."

It might have been devastating for PGGW in Uruguay if 'Agrocentro Uruguay' has fallen into hostile hands. So I hope it wasn't bought just to protect PGW's uncompetitive (gulp did I say that?) patch in Uruguay. No more extra junkets for management here, because they have had a presence in Uruguay for the last dozen or so years anyway. To me it looks like the next step in Mark Dewdney's careful evolution of the business. I see no reason to think about selling more of my PGW shares because of this acquisition.

SNOOPY

[sb9]

From NBR online...

Uruguay buy protects PGG Wrightson's $US100m business
PGG Wrightson’s [NZX: PGW] purchase of a half stake in a retail rural supplies company in Uruguay will help protect its position with its biggest customer in a market worth well over $US100 million a year to the company, chief executive Mark Dewdney says.
PGG Wrightson is buying the stake in Agrocentro Uruguay for an undisclosed sum, signalling the price is below the threshold specified in NZX listing rules.
Mr Dewdney says his company has paid “a relatively small amount of money upfront and then we have an earn-out based on the financial results for the next three years.”
Although details will remain confidential for now, they will be disclosed in next year’s annual report – the transaction has missed the June 30 cut-off date to be included in this year’s report.
The purchase price is going to the existing two shareholders but the parties have agreed to jointly provide fresh capital if and when the business needs it, Mr Dewdney says.
PGG Wrightson has supported Agrocentro since it was founded in 2007 and it now has 120 staff and eight retail stores.
Mr Dewdney explains why his company wanted an ownership interest in the largest customer of its seeds business in Uruguay.
“The ownership interest secures them as a channel to the market for us. It gives us the ability to directly participate in the future strategic direction of their business and it gives us the ability to share in the margins at the retail end of the business,” he says.
Ownership provides security
“As a customer of ours, they could buy seed from others – they still might, even with our ownership, but, as our biggest customer, there’s some vulnerability if you just have a supplier/customer relationship.
“Ownership gives us more security.”
Mr Dewdney says the business is similar to PGG Wrightson’s retail business in New Zealand.
“The strength of our New Zealand business is the fact that we’re the manufacturer, the wholesaler and the retailer and we can connect our individual farmers right back to the point of manufacture,” he says.
“That’s the strength of our New Zealand business model and this is essentially replicating that, or rounding it out, as much as we can in Uruguay,” he says.
“It’s another part of rounding out our strategy in areas we see as key to future growth and we’re not betting the farm.”
PGG Wrightson’s purchase comes in the same month as former chairman Craig Norgate dying.
Mr Norgate served on PGG Wrightson’s board between 2004 and 2010 during which time it expanded aggressively into Uruguay and in 2006 established NZ Farming Systems Uruguay, a company later taken over by Singapore’s Olam.
Mr Dewdney says he noted Mr Norgate’s death with sadness but that there was no connection with the company’s latest investment in Uruguay.
“We’ve been investing in Uruguay for years – we’re building a new logistics centre there at the moment,” he says.
“We sold out of the farm-owning business and have no intention of going back into something like that but we haven’t actually stopped investing in Uruguay.”

[Beagle]

Thanks mate. All makes sense to me.

[percy]

Lightened my exposure to NZ's rural sector today selling our PGW holding.

[Master98]

Lightened my exposure to NZ's rural sector today selling our PGW holding.

you sell your "well positioned" business?, anyway only 270k shares traded today just half of my holding.

[percy]

you sell your "well positioned" business?, anyway only 270k shares traded today just half of my holding.

Well you remain "very well positioned."
No,fortunately I did not hold 270,000 shares.
I have however retained my shares in CVT, PAZ & REL [both unlisted market],SCL, SEK,and Tru-Test.
Tru-Test is very exposed to the dairy sector,so will struggle.

[Master98]

Well you remain "very well positioned."
No I did not have 270,000 shares.
I have however retained my shares in CVT, PAZ & REL [both unlisted market],SCL, SEK,and Tru-Test.
Tru-Test is very exposed to the dairy sector,so will struggle.

you should sell your HNZ shares and take the money from the table and increase your pgw holding ,I put my faith in current pgw management, they grow the company without raise any capital from share holders and pay decent dividend, I sold previous holding at 52c now bought it back from 45c.

[see weed]

you should sell your HNZ shares and take the money from the table,I put may faith in current pgw management, they grow the company and didn't raise any capital from share holders and pay decent dividend, I sold previous holding at 52c now bought back from 45c.

That's funny, I bought 40k at 52c on 6/3/15, were they yours?