PGW - PGG Wrightson

[Snoopy]

All the Superannuation Fund financing issues goneburger, done and dusted - Snoopy ?

And thus the Snow Leopard pontificated:

Trying to square the circle of the accounts for any company or indeed any one aspect of any company over any length of time longer than the issuing of 2 annual reports (that being 1 year and 1 day) is fraught with perils because:
> The company changes;
> The accounting standards change;
> The reporting of accounts change.

The PGW Pension Scheme, here we go ...

Some years ago, 'defined benefit schemes' became an issue overseas. I recall some local reporter doing an article on whether any NZ shareholders should be concerned about the existence of such schemes in NZ companies, and one name stood out: Wrightson. I cannot remember whether it was still Wrightson then, or whether it was the merged 'PGG Wrightson'. But I am not as worried as I was. If we go back to FY2016, the year before the Seeds Division de-merger you can see why:

	FY2016	FY2022
Defined Benefit Plan Deficit	($25.729m)	($2.126m)
Net Profit Declared	$39.678m	$24.286m

Back in 2016 the pension scheme deficit was about half the net profit for the year, whereas by 2022 it was only one tenth. So while it is annoying for shareholders that PGW seems to have to keep topping up the defined benefit scheme with one off payments, they appear to be in a much stronger financial position today to be able to do so today. Furthermore those payments are getting smaller in absolute terms too (see my post 5362).

I also know that the actuarial models used to forecast future deficits in the 'defined benefit pension scheme' are not aligned to IFRS reporting rules. This explains why despite the scheme being apparently in surplus at EOFY2021, PGW nevertheless put a $567k payment into the fund over the subsequent year. The IFRS reporting where discount rates were linked to NZ ten year bond rates magnified any future liabilities in 'present day terms', as the ten year bond rate dropped below 1%. However, as ten year bond rates rise again, that 'shadow' should recede. Working against that 'bank rate effect' is the value of the underlying investments used to fund the defined benefit scheme going down as sharemarkets fell. In this circumstance I find myself agreeing with the Snow Leopard. Knowing the position of your 'pension plan market investments' as at 30-06-2022, may not be all that helpful in figuring out the composition of the funding engine now. However, the guys and gals at PGW running the scheme know all about this. So rather than try and 'second guess' what those fund managers should be doing (based on our out of date historical information), I think it is more useful to look at what they did do, while knowing more information than shareholders are privy to.

Again, if we refer back to post 5362, the PGW contributions are well down in the latest three years, compared to the previous three before that. It looks to me that PGW staff do not have an issue with their defined benefit plan as it sits today. And if they are not worried about it, then neither am I!

SNOOPY

[winner69]

Snoopy …..that Pension Plan getting smaller by the year probably because pensioners and their wives are dying off. No new members força while.

Many such defined benefit schemes were essentially wound up by offering a lump sum payment and hoping enough would accept and bugger off

I suppose PGG considered that ….bit surprised they didn’t proceed.

[Snow Leopard]

....I find myself agreeing with the Snow Leopard....

Sounds like a good idea:


The Snow Leopard Conservancy

[Snoopy]

All the Superannuation Fund financing issues goneburger, done and dusted - Snoopy ?

Snoopy …..that Pension Plan getting smaller by the year probably because pensioners and their wives are dying off. No new members for a while.

Many such defined benefit schemes were essentially wound up by offering a lump sum payment and hoping enough would accept and bugger off

I suppose PGG considered that ….bit surprised they didn’t proceed.

There has been some rationalisation of the PGW defined benefit plan(s) Winner.

From AR2017 p62
"During the period the assets and liabilities of the Wrightson Retirement Plan were transferred to the PGG Wrightson Employee Benefits Plan. This resulted in the Wrightson Retirement Plan having no liability as at 31st December 2016. The remaining defined benefit plan is not open to new members"

In fact neither plan has been open to new members for some time.

From AR2013 p75
"The two defined benefit plans are open by invitation, however the group has not invited new members to the schemes since June 1995 and November 2000 respectively."

Details of the defined benefit plan(s) were first reported in detail in AR2008. Page 59 of that report shows a total defined benefit obligation of $68.705m when discounted back to a present value. At that point the value of the plan assets was $69.528m - so the plan(s) were in surplus. Go forward one year and the plans' assets had collapsed in value by more than 30% to just $48.183m. No doubt the GFC had something to do with that.

Fast forward thirteen years all the way forwards to FY2022 and the Defined Benefit obligation is still $49.165m. Those oldies are doing a good job of 'hanging on'. The $2.126m unfunded portion of that is 4.3% of the total. So it is significant but in total dollar terms in relation to group profit, a capturable obligation, should further capital injection by PGW be required.

Of course we have to remember that if some up and coming your manager was offered to join the scheme at age 30 in November 2000, they would only be aged 52 now. That PGW defined benefit scheme still has a few decades to run I think.

SNOOPY

[Sideshow Bob]

https://www.nzx.com/announcements/407033

PGG Wrightson Limited1 (PGW) today announced its results for the first half of FY23.
Key highlights of the first six months to 31 December 2022 included:
❖ Operating EBITDA2 of $47.8 million (up $0.4 million or 0.9%)
❖ Revenue of $585.8 million (up $33.4 million or 6.0%)
❖ Net profit after tax of $21.2 million (down $1.3 million or 6.0%)
❖ Interim dividend of 12 cents per share
❖ Total Shareholder Return3 (TSR) of +3.4%
 Updated Operating EBITDA guidance of around $57 million for financial year to 30 June 2023

[winner69]

Loooks good Bob but includes a profit downgrade

Last year operating profit $67m and then a few months ago they said F23 will be about $62m

And now they say it’s going to be about $57m

[winner69]

Hey Snoops … FCF looks a bit sad eh and the trend over the last year or so not too healthy (my view)

Love companies thar borrow to keep the divies coming

[percy]

It is the same every year.
Nature of the beast.
Negative cash flow first half as they stock up on farmers' requirements.
Second half cash flow positive as farmers' pay for purchases.
What is known as "seasonal demand".

[winner69]

It is the same every year.
Nature of the beast.
Negative cash flow first half as they stock up on farmers' requirements.
Second half cash flow positive as farmers' pay for purchases.
What is known as "seasonal demand".

But the outflows are getting larger and second half inflows aren’t always offsetting the first half outflows

Betcha you always made sure you got heaps more cash in over the year than the initial outlay on books

[percy]

But the outflows are getting larger and second half inflows aren’t always offsetting the first half outflows

Betcha you always made sure you got heaps more cash in over the year than the initial outlay on books

The word "SUBSTANTIAL" comes immediately to mind..lol