PGW - PGG Wrightson

[Snoopy]

No mention of this in the main text of the Annual Report. Not even an announcement to the NZX!

"The Standardbred Division specialises in the trading of harness horses. The team has a dedicated staff of five"

“The team experiences an unusual combination of excitement and angst on the three big days of the year. We need to get it right, or it impacts significantly on the annual performance of the division and so far we have. In the last 30 years, the team have catalogued and sold over 20,000 Standardbred horses."

"When our division started the pedigrees in the catalogue were handwritten, but over the last 30 years our team has developed an electronic database of Standardbred race records and pedigrees. This database is unequalled in the country, so we consider it one of our most valued assets.”

Two years down the track and this 'valuable asset' of race records and pedigrees became worthless!

The last sales under the PGG Wrightson yearly sales banner was on February 2018

https://www.aldebaranpark.com/pages/...ch-new-zealand

And it looks like they only had one horse to sell - Aldabaran Tess!

Just in case anyone was wondering why I have become fascinated with, what is in the grand scheme of things, a small albeit (formerly) successful part of the Livestock business unit that no longer exists.....

PGW has changed a lot over the last five years, the most telling change being the selling off of the Seed business. Looking back over those years, I want to make an 'apples with apples' progress report. And that means, from a present day perspective, taking out historical cashflow streams that no longer exist under PGG Wrightson management today. This is why the 'secret' shutdown of horse trading back in FY2020 caught my attention.

Looking at the Consolidated Statement of Profit and Loss produces a slightly different picture to what I first thought (note that the 'discontinued operations' for the year in question relate entirely to Standardbred, even if you have to dive deep into other pages of the annual report to find this out):

Results from discontinued operations, net of income tax	($0.371m)
plus gain on sale from discontinued operations, net of income tax	$1.078m
equals Profit/(Loss) from discontinued operations, net of income tax	$0.707m

So it does appear that in its last year of operation (admittedly encompassing the Covid-19 lock-downs) 'Standardbred' was losing money. It could be that the sale price of $1.078m for discontinued divisions was largely made up of money for that much trumpeted 'electronic database' as well as a gavel and an auctioneers stand. So maybe we shareholders did not lose out as badly as I thought.

The segmented result presentation, which separated out the 'Standardbred' division (AR2020 p41), was a bit strange: $0.707m of 'after tax net profit' on zero revenue. But then we learn on AR2020 p75 that:

"the comparatives have been restated to present the Standardbred business as a discontinued operation."

Does this mean the sales revenue for Standardbred as already been removed from the overall revenue presentation? I certainly hope so. Because I don't like my alternative explanation below.

It could be we had these five guys who only work for three days per year (that means 362 days off on this full time job every year, where do I sign up?) only had one horse to sell. And the horse didn't sell - hence no revenue was raised.

That means the operational loss for the year of $371,000 represented these five guys wages: $371,000/5 = $74,200 each after tax on average. Close enough to $100k each before tax I reckon. Those guys were on a good wicket, too good as it turned out. And that is why 'The Dewd' bolted the stable door on 'Standardbred'.

SNOOPY

[Snoopy]

	FY2019 (iter. 1) (indicative forecast for FY2020)	FY2020 (as reported)
Cash On Hand	($1.160m)	($16.868m)
Short Term Bank Loans	$3.920m	$40.000m
add Long Term Bank Loans	$31.742m	$20.000m
add Net Defined Benefit Liability (Pension Plan deficit)	$5.883m	$9.838m
add Employee Entitlements	$16.821m	$13.960m
Total Bank and Worriesome Liabiliities {A}	$57.206m	$66.930m
NPAT + Impairment & Fair Value adj. {B}	$7.187m (i)	$7.940m (i)
Minimum Debt Repayment Time {A}/{B} (in years)	7.96	8.43

Notes

Iteration i (Assuming Profits from Seed Sales paid through to Shareholders)

(i) Calculation of NPAT adjusting for 'Impairment & Fair Value' chnages (representing available cashflow for each year) is as follows:

FY2019: $4.000m+$3.187m = $7.187m
FY2020: $7.133m+$0.807m = $7.940m

------

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

In terms of the ability to repay all debt, I would argue PGW is in its worst position since the GFC when it was bailed out by Alan Lai and Agria. Banks are being told to look upon their loans to business more kindly, so who knows how the bankers are reacting to PGW's position. But I can't see any adjective more suitable for describing PGW's debt position as 'high'.

To some extent this end of financial year debt position is artificially favourable, because it comes off a relatively buoyant first half, before the drought hammered the second half year into a loss. The long term weather outlook is more dry weather in the east of the country over the coming summer. That means up until December 2020, we might be looking with a calendar year with no net positive income for PGW.

In the 23rd July 2019 released document "Notice of Special Meeting and Explanatory Notes" outlining the proposed capital structure following the capital repayment, the forecast core debt level was to be between $25m and $50m (page 9). Taking the cash position in to account, that means we now have debt headroom of just:

$50m - ($40m + $20m - $16.868m) = $6.868m

This is not much. I would be fairly confident in predicting that as well as no final dividend for FY2020, there will be no interim dividend for FY2021 either. In my November 2019 review I said

"This is not a bond substitute."

No dividend for at least a year is a manifestation of that comment.

I made the above post in August 2020. My 'confident prediction' of 'no interim dividend' for FY2021 did not come to pass . It was 12.0cps. So a 'fail' for me on the predictive front, even though my bank account ended up taking an 'unexpected turn for the better' as a result of my 'failure'. So have I learned anything from this failed forecasting event?

The answer is yes. Whereas MDRT is a straightforward risk tool to use for trading companies, I feel it might be overstating the credit risk for financing companies. What is that you say? PGW is a rural services trading company is it not? Did they not sell off their finance arm to Heartland group a number of years ago? Well, yes they did, until they brought the finance business back by stealth under the new 'GoLivestock' (GoBeef and GoLamb) banner. Moving forward to FY2022, this new finance business is going from strength to strength with $66.109m of 'GoLivestock' loans on the books at the 30-06-2022 balance date.

$66.109m is an overstatement of the loan book on an annual basis. Livestock loans are seasonal. To get a representative loan balance over the year it is best to take an average of the three loan balance date points across FY2022 that we have: 30-06-2021 ($45.869m) , 31-12-2021 ($35.805m) and 30-06-2022 ($66.109m):

Averaged GoLivestock loan balance over FY2022: ($45.869m+$35.905m+$66.109m)/3 = $49.294m

We should note -in passing- that the interest earned on these 'GoLivestock' loans over FY2022 was $4.254m. Based on that averaged loan balance, this represents a gross return to PGW shareholders of:

$4.254m/$49.294m = 8.6%

That is a very nice little income stream for we shareholders. BUT -and here is my very important learning point- it is not the income on that loan that is taking the risk out of these loan transactions. It is the value of the livestock, that PGW still own, that is the security on this debt. This means that when we consider the debt risk we share holders face, we need to change the MDRT calculation from this:

MDRT = (Total Bank Debt) / (Declared NPAT)

to this

MDRT = (Total Bank Debt - Seasonally Adjusted 'GoLivestock' Debt) / (Declared NPAT - GoLivestock NPAT)

Effectively I am removing both the 'GoLivestock debt' and 'GoLivestock' income from the MDRT equation. Because the security of the 'GoLivestock' debt does not depend on the income earned from the livestock asset. The security of the debt is the livestock asset.

SNOOPY

[Snoopy]

BUT -and here is my very important learning point- it is not the income on that loan that is taking the risk out of these loan transactions. It is the value of the livestock, that PGW still own, that is the security on this debt. This means that when we consider the debt risk we share holders face, we need to change the MDRT calculation from this:

MDRT = (Total Bank Debt) / (Declared NPAT)

to this

MDRT = (Total Bank Debt - Seasonally Adjusted 'GoLivestock' Debt) / (Declared NPAT - GoLivestock NPAT)

Effectively I am removing both the 'GoLivestock debt' and 'GoLivestock' income from the MDRT equation. Because the security of the 'GoLivestock' debt does not depend on the income earned from the livestock asset. The security of the debt is the livestock asset.

Have a look at the 'Consolidated Statement of Financial Position' (AR2022 p50). There is a current asset there of 'Go livestock receivables'. $65.504m. This is not some bill that PGW needs to send their debt collectors around to hassle farmers over repaying. This book entry represents live animals 'down on the farm' that at some point will be rounded up and on-sold. The farmers that are looking after these animals are merely the guardians of these beasts that we shareholders own:

"the group retains legal title to the livestock until its sale" (from AR2022 p62)

These receivables are not loans taken out on cars that are depreciating by the day. They are not loans on holidays where the experience has been had and we are relying on the loan holder to keep sweating at their day job to repay it. These 'GoLivestock Receivables' are instead appreciating assets, carefully tended animals, entrusted to the care of farmers vetted by PGW itself. These are farmers that PGW know and have had successful business relationships with for several years.

There are some industry specific risks to consider. As an animal gains weight it generally becomes more valuable. But in a drought, where the animal sustaining capability of the land is reduced, there may be a sudden need to reduce the number of animals on farm. All of a sudden the freezing works are overwhelmed with stock and the price offered to the farmer 'per head' plummets (notwithstanding the animal weight). Add to that the 'storm risk' and the 'disease risk', which may account for some mortality among the stock being raised. But in general, even if a farmer is forced off their land (worst case), the farm itself still exists, bought by a new less leveraged farmer owner. So animals keep being bred, and keep needing to be fattened up. The 'fattening up' bit is what the 'GoLivestock' part of the PGW business supports. And the time frame for this aspect of farming is normally a few months, not years.

Debt Position PGW	EOFY2022
Cash On Hand	($4.676m)
add Short Term Bank Loans	$7.500m
add Long Term Bank Loans	$30.000m
add Net Defined Benefit Liability (Pension Plan deficit)	$2.126m
add Employee Entitlements	$24.643m
Total Bank and Worriesome Liabiliities	$59.413m
less Animal assets (annualised average)	($49.294m)
Total Net Debt	$10.119m

One tweak I might need to make on the above table is to put a 'fudge discount factor' on the value of PGW's animal assets. The above table is treating animals as 'cash in the bank' which might be a little optimistic. Then again that animal value is the value of the animal as bought at auction - not when it has been fed up six months down the track. So maybe I don't need any fudge factoring? I would welcome others comments on whether my overall picture of PGW debt is now more realistic. For me, accounting for the PGW animal assets in this way, puts the overall PGW debt picture in a new light. $10.119m of net debt sounds a lot better than $59.413m!

SNOOPY

[Snoopy]

Debt Position PGW	EOFY2023
Total Bank and Worriesome Liabiliities	$59.413m
less Animal assets (annualised average)	($49.294m)
Total Net Debt	$10.119m

For me, accounting for the PGW animal assets in this way, puts the overall PGW debt picture in a new light. $10.119m of net debt sounds a lot better than $59.413m!

The next task is to work out what the profit margin is on these GoLivestock loans. To work that out, we need to calculate PGW's bank loan 'borrowing costs' as a percentage of bank funds borrowed. The borrowing costs over FY2022 were $1.832m (AR2022 p55). Once again we will use our three time stamp data points to average the funds borrowed across the year.

Reference Date	30/06/2021	31/12/2021	30/06/2022
Cash & Cash Equivalents	($3.367m)	($1.113m)	($4.676m)
Short Term Debt	$9.900m	$18.000m	$7.500m
Long Term Debt	$0m	$30.00m	$30.000m
Total Net Debt	$6.533m	$46.867m	$32.824m

=> Average Debt over Year = ($6.533m+$46.687m+$32.824m) / 3 = $28.681m

So the interest rate charged by the banks on the funds loaned was: $1.832m / $28.681m = 6.4%. We know from part 1 of this analysis that the return on funds loaned by PGW was 8.6%. The difference between the borrowed and lent loan rates, multiplied by the average GoLivestock loan balance is the NPBT earned by PGW from these GoLivestock loans:

(0.086-0.064)x $28.861m = $0.635m.

Of course it is likely that PGW earns a commission on the buying and selling of this animal stock via its own sale-yards as well. But such a commission would have been earned whether the animal stock was financed by PGW or not. It is the financing risk we are interested in here. It is only the $0.635m that is directly connected to that.

The $0.635m of profit earned on the funding aspect of the GoLivestock loans is taxable. The associated after tax profit figure was: 0.72 x $0.635m = $0.457m.

Now the declared profit for FY2022 was $24.286m. I would subtract from that the after tax effect of the impairment reversals on saleyards and the impairment reversal on the right of use assets related to the water business (AR2022 p54).

$24.286m - 0.72($0.414m+$0.695m) = $23.488m

We now have enough information to do our two alternative MDRT calculations

MDRT (old way) = (Total Worrisome Debt) / (Declared NPAT) = $59.413m/$23.488m = 2.53 years

MDRT (new way) = (Total Worrisome Debt - Seasonally Adjusted 'GoLivestock' Debt) / (Declared NPAT - GoLivestock NPAT)
= ($59.413m - $49.294m) / ($23.488m - $0.457m) = 0.44 years

------------------------------

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

That means my revised modelling has seen PGW drop from what I had classed as a 'medium debt' company back to a 'low debt' company. And because PGW works in a turbulent sector like agriculture, this is good to see.

SNOOPY

[winner69]

Snoops …thanks for the memories re horse trading.

And there must still be few of those people still collecting their monthly pension payment courtesy of current shareholders

[Snoopy]

What’s the comparative for F19 after allowing for IFRS16

Have a look at AR2019 Note 29h Winner. Under IFRS16, operating expenses are expected to decrease by $21.4m. But interest charges are expected to rise by $6m and depreciation goes up by $16m. By my maths this equates to a change in 'Net Profit After Tax' if IFRS16 had been in force over FY2019 of:

0.72 x ( $21.4m - $16.0m -$6.0m ) = -$0.432m

I have made my Christmas season brain exercise puzzle, the task of taking IFRS16 out of the NPAT results at PGW. FY2019 was easy (see above). Unfortunately subsequent years are more opaque. The main problem is that unlike other companies I have looked at, lease expenses (the old rent) are not separately detailed in the cashflow statement. So we have to infer what these might be from other annual report entries.

Nevertheless the cashflow statement is useful in calculating post IFRS16 'rent'.

			New Rent (added to finance expense)	Old Rent (removed from operating expense)
	Lease Amortisation & Impairment Post IFRS16 {A} (2)	Financing Costs wrt Lease Payments Post IFRS16 {B} (2)	{A}+{B}	IFRS16 adjustment to Operating Expenses
FY2019	N/A	N/A	N/A	$21.904m (1)
FY2020	$17.586m	$4.185m	$21.771m	$21.744m
FY2021	$18.299m	$4.036m	$22.335m	$21.722m
FY2022	$18.873m	$3.786m	$22.659m	$?m

Notes

1/ Figure for FY2019 is prior to IFRS16 being adopted and is explicitly stated to be 'Rental and operating lease costs' (AR2019 Note 3 'Other Operating Expenses'). Had IFRS16 been adopted for that year, I believe that same figure would have been declared as the 'IFRS16 adjustment to Operating Expenses'. (Note: Under IFRS16 operating expenses reduce, because the old 'rent' is re-stated in a slightly different form as a finance expense.)

2/ Figures from columns (A) and (B) are from the cashflow statements of the respective years.

3/ The 'Segment Report' 'Operating Segment Information' (right at the bottom of the FY2020 and FY2021 annual report's operating segment table) contains the IFRS16 EBITDA adjustment. That same number is labelled as 'other operating expenses', when presented under the "Impact of NZ IFRS16 Leases" explanatory note (AR2020 p37). If you then go to 'Note 3' where all the 'Other Operating Expenses' are optimised you will see a big drop in the 'Rental and operating lease costs' of approximately this amount ($21.744m) year to year. This is a strong hint that the $21.744m IFRS 16 adjustment to EBITDA for FY2020 is what accountants used to call 'rent'.

( Background IFRS16 replaced a single operating expense (rent) with two charges:
a/ The 'depreciation of a right of use asset'.
b/ An associated 'interest on lease liabilities' charge.

Over the length of each particular rent contract, this IFRS16 change is a net zero adjustment. However, on any particular year the 'preIFRS16' and post 'IFRS16' 'rent' are typically not the same number. )

The other net effect of IFRS16, reducing traditional operating expenses and creating new depreciation and interest charges, is that EBITDA increases (under IFRS16): The result reclassifying a traditional operating expense (rent) by financial instruments. (I believe it is reasonable to regard the EBITDA IFRS16 adjustment to 'other operating expenses' (AR2020 p37) as the old 'rent').

-----------

Inexplicably, PGW did not report and post a prior IFRS16 adjustment over FY2022. The way I see it, that means it is no longer possible to calculate what the PGW profit would have been prior to IFRS16 being introduced. And why does that matter? Because when considering banking covenants, the banks always remove the effect of IFRS16. And I think we shareholders should be allowed to evaluate our company the same way a bank does.

I would love it if I have misinterpreted the figures, regarding IFRS16, that PGW has produced (or not) for FY2022. Sadly, though, I feel I am correct

SNOOPY

[Snoopy]

	New Rent	Old Rent
	Post IFRS16 'rent' {A}	Pre IFRS16 rent {B}	NPBT adjustment to remove IFRS16 {A}-{B}	NPAT adjustment (assume 28% tax, use adjustment factor x0.72)
FY2019	N/A	$21.904m	N/A	$0.0m
FY2020	$21.771m	$21.744m	($0.027m)	($0.019m)
FY2021	$22.335m	$21.722m	($0.613m)	($0.441m)
FY2022	$22.659m	$ ?m	$ ?m	$ ?m

Notes

1/ Rent has increased under IFRS16 reporting
=> NPBT has decreased under IFRS16 reporting
=> To restore NPBT back to where it was under the old accounting rules, you must 'add back' the difference in rent


SNOOPY

[Snoopy]

Time to reprise my 'snooping'. How does PGW go when subjected to Buffett's four investment selection tests?

1/ Top Three player in chosen market?

PGG Wrightson Limited (PGW) was formed in 2005, a result of a merger between two established agricultural supply service leaders: Wrightson Limited and Pyne Gould Guiness. However, the DNA of the operation goes back much further than this. Wright Stevenson & Company was established in Dunedin in 1868. Even they are a new boy on the block though, as Gould Beaumont & Co. had been founded in Christchurch as early as 1851.

Under the leadership of new CEO for FY2018 Ian Glasson, PGW has undergone a 'strategic review'. The review is to establish how much capital is required for PGW going forwards and how that capital might be supplied. This could include the divestment of certain business units. PGW is a diverse company. But the 'One PGW' motto of the previous CEO seems to have been dropped. The recognised business units are below:

1/ Merchandising (rural themed products) with 94 stores branded 'PGGW Rural Supplies' and 'Fruitfed Supplies'. Traditional competitors are 'NZ Farm Source', the rebranded RD1 (Fonterra owned) with 71 stores and Farmlands (a co-operative) with over 80 stores. There are others, but on a smaller scale to 'the big three'.

2/ Livestock Trading: PGW has NZs largest group of livestock representatives with 219 representatives across the country , handling 50%+ of transactions nationwide. The core market is sheep and beef cattle. But 'Livestock' will also sell dairy cows and deer velvet. The traditional saleyards are to be supplemented by a sophisticated on-line sales channel.

3/ Finance & Insurance: Commission agents for AON and Vero. Commission agents for Heartland Bank, under the 'PGW Finance' brand (owned by Heartland). PGW finance their own in house livestock transactions via their GO-beef and GO-lamb initiatives.

4/ Real Estate: Specialising in rural and small town properties. Together with Bayley's, PGW is one of the largest two players in what is a fragmented market.

5/ Water: PGW offer turf irrigation, for landscaping and sports use, along with their more traditional 'rural irrigation' and the bread and butter ongoing servicing work that tends to be higher margin. There is a wholesale side of the business too, supplying water and irrigation products. Turnover in FY2018 of $41m is substantial but well down on the FY2015 peak. This business is now loss making at EBITDA level. PGW stands out as a major national player in a fragmented irrigation market. (source: Kord Mentha Independent Appraisal Report section 3.4.2)

6/ Wool: PGW manages a substantial portion of the strong wool supply chain in New Zealand , from on farm procurement, freight and logistics through to sales (be they via auction, private sales, export (the Bloch & Behrens brand) and domestic). Higher value finer wool is marketed through the formerly associated NZ Merino Company. PGW sold their half stake to the growers co-operative in June 2011.

7/ Seeds: The largest seed producer in the Southern Hemisphere, with interests spread across New Zealand, Australia and South America. For seed and grain production PGGWs key competitor is Barenbrug. Barenbrug is a global seed business headquartered in the Netherlands that trades as 'Agriseeds' in NZ and 'Heritage' in Australia Seed and Grain Australian and South American businesses facing challenging climatic conditions over FY2018.

The bedrock of PGW seeds remains in New Zealand. The beachhead in Uruguay in particular is where PGW is building a strong presence. Building the business in neighbouring Argentina and Brazil looks to be the next step. Smaller acquisitions have been made in Australia in recent years.

Conclusion: Ticks the 'major player' (top three) criterion across all markets in which they operate. 'Pass Test'

Huge changes since the last time I looked at PGG Wrightson, The world class global seeds business has been sold to DLF Seeds A/S of Denmark. PGG Wrightson has retreated to a purely New Zealand based rural servicing organization. How does the 'new' PGW go when subjected to Buffett's four investment selection tests?

1/ Top Three player in chosen market?

PGG Wrightson Limited (PGW) was formed in 2005, a result of a merger between two established agricultural supply service leaders: Wrightson Limited and Pyne Gould Guiness. However, the DNA of the operation goes back much further than this. Wright Stevenson & Company was established in Dunedin in 1868. Even they are a new boy on the block though, as Gould Beaumont & Co. had been founded in Christchurch as early as 1851.

The sale of the seed business was a catalyst for a deeply self reflective review on what makes PGW a 'go to' supplier of choice. A key differentiating factor identified was the level of technical expertise that the PGW sales force possesses. PGW creates a 'synergistic circle' whereby sharing this technical expertise is a key to creating new sales opportunities.

The recognised business units are below:

1/ Merchandising (rural themed products) with 87 stores branded 'PGGW Rural Supplies' and 18 branded 'Fruitfed Supplies' (total Turnover $900m, after subtracting $50m for Water division turnover). Traditional competitors are 'Farm Source', the rebranded RD1 (Fonterra owned) with 68 stores (Turnover $23.423b-$22,955m= $498m) and Farmlands (like Fonterra, a co-operative) with 82 stores (Turnover $2,000m+). There are others, but on a smaller scale to 'the big three'.

2/ Livestock Trading: PGW has NZs largest group of livestock representatives with more than 180 representatives across the country, operating more than 50 sale-yard sites across New Zealand. The core market is sheep and beef cattle. But 'PGW Livestock' will also sell dairy cows and deer velvet. Saleyard business is conducted by farmers on site concurrently with PGW's in house on-line sales platform bidr®. Others in the NZ livestock trading game include "NZ Farmers Livestock" with more than 100 staff over 15 sale-yard sites, complete with their own web based trading tool: 'MyLiveStock'. Listed 'Allied Farmers' currently owns 67% of "NZ Farmers Livestock."

3/ Finance & Insurance: Commission agents for 'BrokerWeb Risk Services', a broker with access to multiple insurance companies.. PGW finance their own in house livestock transactions via their GO-beef, GO-lamb, GO-deer and GO-dairy-cow initiatives. PGW are nominally commission agents for Heartland Bank, under the 'PGW Finance' brand (owned by Heartland). However, with Heartland stating they want to reduce low margin rural relationship lending, and PGW itself making no mention of this arrangement in recent years, it could be that 'PGW Finance' is effectively being wound up.

4/ Real Estate: Specialising in rural and small town properties. Together with 'Bayley's Country' (82 listed on line, excluding development sites), a specialized sub-brand founded in 1999, PGW (439 properties listed on line) one of the largest two players in what is a fragmented market. "Property Brokers' is another provincially focussed real estate brand that currently has 177 rural properties for sale across New Zealand.

5/ Water: PGW through their 'Water Force' brand, have looked to diversify their business so as not to be dependent on dairy price cycles. 'Water Force', through the AIS (Advanced Irrigation Systems) sub brand, offer turf irrigation, for landscaping and sports use, to sit alongside the more traditional 'rural irrigation' and the bread and butter ongoing servicing work that tends to be higher margin. There is a wholesale side of the business too, supplying water and irrigation products. Turnover in FY2018 of $41m is substantial but well down on the FY2015 peak. No separate disclosure of turnover or profitability has been published since FY2018. What we do know is that the business has been restructured to lower its cost base, and Covid-19 supply chain issues are continuing. PGW stands out as a major national player in a fragmented irrigation market. (source: Kord Mentha Independent Appraisal Report section 3.4.2)

6/ Wool: PGW , manages a substantial portion of the strong wool supply chain in New Zealand, from on farm procurement, freight and logistics via four large warehouses, through to sales (be they via auction, private sales, export (the Bloch & Behrens brand) and domestic). Higher value finer wool is marketed through the formerly associated NZ Merino Company. PGW sold their half stake to the growers co-operative back in June 2011. But pricing for cross bred wool in an already depressed market - slowed further by Covid-19 - continues to be challenging. From AR2021 p23: "We anticipate an increasing shift from synthetics to natural fibres, which will ultimately result in stronger returns for our growers." I certainly hope so. But is hope a viable investment strategy?

Conclusion: Ticks the 'major player' (top three) criterion across all markets in which they operate. 'Pass Test'

SNOOPY

[Balance]

Thanks Snoopy.

Happy holder here and glad indeed that a takeover at $3.50 did not happen when PGW sp was $2.75!!!!

[mike2020]

I have always liked the company but I do feel the next results won't thrill, the last one's didn't. My reasoning is the RE division will be down and quite possibly the retail side as well with farmers under huge cost pressure. I would expect the company to have expenses rising as well.
I would rather be in than out but I am expecting a bit of a down cycle which was showing on the last results.