PGW - PGG Wrightson

[percy]

I had understood that PGW will pay likely the same high dividend as last year, and i remember that PGW/Agria Management like to set the expectations low, and prefer the market positive.
Currently AGRIA is trying to swallow PGW shares from New Hope. I wonder were all the money comes from. But Chinese banks are seeking investment opportunities in the whole world.

Expectations are modest.Growth will come from Australia and Uruguay,but the strength on the NZ $ means there will be no increase in bottom line profit.
The business does not require more capital,so depending on weather, and the usual challenges the rural sector face,the high dividend payout should continue.But remember any unforeseen set backs will put pressure on PGW's capacity to pay the high dividends.
There has been no pick up in irrigation.

[Beagle]

Any reasons for the drop?

See post 3993 above. Nobody's taken me to task over my figures. That pension plan is going to be a thorn in their side for many years sucking cash flow from this company (its a material headwind for the foreseeable future). $9m cash flow sucked out of a company only generating circa $30m in cash flow, material ?, you bet ya it is !

I expect they will plug the superannuation black hole this year with sale and lease back's of rural buildings but they can't keep doing that every year can they !

All of last years profit growth came from an unusually low tax for that year. I can't see any reason why the SP shouldn't return to the baseline 40 cents per share again, prospects for FY17 certainly aren't any better than 2015. I sold at 52 cps ex divvy, pleased to be out.

[winner69]

The mist telling line in the PGW Accounts is their Revenue Line

Last 5 years revenues (FY12 first) - $1,337m, $1,132m, $1,219m, $1,203m and $1,182m in FY15

Revenues declining eh - in spite of new strategies, fine tuning, postulating and great talk ad nauseam. It's always gunna to be better

Can't 'grow' forever by cutting costs

PGW is what it is - a no growth company with skinny margins - but generally generates enough cash to pay a reasonable dividend - just wish they wouldn't tout this 'growth' story

Share price then - what punters want to pay for the 3.75/4.00 cents dividend (what happens when interest rates inevitably rise?)

[Beagle]

I don't see over the long term how they can pay that dividend and fund the super scheme. At the risk of sounding like a broken record, the super scheme liability grew $9m last year and that was in the good year for the markets ! The think the brokers are totally missing this major point !

[Snow Leopard]

See post 3993 above. Nobody's taken me to task over my figures....

See this post.

Best Wishes
Paper Tiger

[RGR367]

See this post.

Best Wishes
Paper Tiger

And finally as in old software programming, a GOTO loop

[Beagle]

Paper Tiger - You didn't debate the numbers per se, just accept the directors word for it that NPAT will be similar...something I'd already read but was looking past what I think may be a little optimistic.

You'll have to forgive the hound for being naturally cautious in this soft market. So you accept at face value that the artificially low tax rate can continue and we won't revert to the full tax rate as in FY15 ?

Such blind faith in directors based on unusually low tax rates. The same directors that trumpeted a marvellous 20% increase in net profit in Fy16 without actually highlighting the entire profit increase was due to a much lower tax rate...Hmmm. These low tax rates can go on forever... right ?

[Beagle]

Am I right in saying that it is low interest rates, lowering the discount factor on future liabilities, that is doing the damage here? Somehow in a rising market, the value of pension plan assets dropped by 10%. Who are the fund managers that did that?

Did I read that expected Group contribution figure to the pension funds of $9.51m for FY2017, up from just $1.08m this year correctly? That is one hell of a hit on next years profit!

SNOOPY

Snoopy was first to pick this up on 9 August. I've done some more digging and the interesting thing is they're having to put in all this extra money because the size of the pension liability went up $9m last year. Actuaries rework their numbers every year based on assumptions around future returns, and average life expectancies. This in a good year for the markets. People are living a lot longer and with much lower market returns and ultra low interest rates the funding of historical superannuation schemes is shaping up as a major issue for companies which have them going forward.

Anyway...I have done my bit to highlight the risks.

[Snow Leopard]

And finally as in old software programming, a GOTO loop

The GOTO is dead, any decent programmer will write

whille(true)
{
AdNausem();
}

Best Wishes
Paper Tiger

PS: Commenting code is for wimps

[Snow Leopard]

Paper Tiger - You didn't debate the numbers per se, just accept the directors word for it that NPAT will be similar...something I'd already read but was looking past what I think may be a little optimistic.

You'll have to forgive the hound for being naturally cautious in this soft market. So you accept at face value that the artificially low tax rate can continue and we won't revert to the full tax rate as in FY15 ?

Such blind faith in directors based on unusually low tax rates. The same directors that trumpeted a marvellous 20% increase in net profit in Fy16 without actually highlighting the entire profit increase was due to a much lower tax rate...Hmmm. These low tax rates can go on forever... right ?

If you care to read back on this thread you would notice that I stated that the relationship between EBITDA and NPAT for PGW was nearly as mecurial as.... and a bit of caution was warranted.

I then pointed out that normalised FY16 was the same as FY15.

So we start this year with an estimated EBITDA range $1M higher than last year and the statement about NPAT. I also said I was 'fascinated' by such.

Now strangely when you like a share (mentioning no airlines) you seem to regard the directors as wonderfully infallible people. Me I know that all humans are only human.

However I presume that some competent accountant type in the company has assured them that the wonderfully complex arrangements of PGW will result in a reduced tax amount for this year similar to FY16 and also FY14, so they have told us this.
I as always, work out a normalised value.

It can be interesting to look at the cash-flow statements and see how much cash they have given the tax man.

So going forward they have made a commitment to put (extra) money in to the pension funds over the next few years and somehow the funds took a hit this year (probably overweight AIR ). Moving money into the fund does not affect profits but the performance of the fund does.

Where we end up at the end of the year depends upon the ups and downs of farming, so, as they say, if you can't stand the smell get out of the cow-shed.

Best Wishes
Paper Tiger