PGW - PGG Wrightson

[percy]

Conversion of sheep and beef farms into carbon farms continues at alarming rate



New research shows the scale and pace of sheep and beef land purchased for forestry is even higher than first thought.



An updated Orme & Associates report on land-use change from pastoral farming to large-scale forestry shows the amount of land sold in 2021 soared 66 percent compared to the previous year.



Beef + Lamb New Zealand (B+LNZ) CEO Sam McIvor says the report will be alarming for farmers, rural communities, and wider New Zealanders, who are already concerned about the conversion of food producing sheep and beef land into carbon farming.



“The Orme & Associates report was commissioned by B+LNZ two years ago to track the amount of land purchased for afforestation and taken out of pastoral production. It initially showed more than 52,000ha of land was purchased for forestry interests in 2021,” he says.



“However, the latest revised data shows that figure to be more than 63,000ha, a 66 percent increase on 2020 and up from 7,000ha in 2017.”



Uncertainty over policy changes led to a decrease to 36,000ha in 2022, but McIvor says this figure is likely to increase because there is a backlog of applications sitting with the Overseas Investment Office (OIO).



“This takes the total to more than 200,000ha of sheep and beef farms bought over the last five years, which is a significant concern for the sheep and beef sector and rural communities,” he says.



McIvor says the scale of change is far more than what is recommended by the Climate Change Commission and will have a negative impact on rural communities, food production and export income, which affects all New Zealanders.



“New Zealand is one of the only countries in the world that allows fossil fuel emitters to offset 100 percent of their emissions,” he says.



“The Government is currently consulting on changes to the Emissions Trading Scheme, and it needs to act.



“B+LNZ is not anti-forestry, there is absolutely a place for it and for some offsetting. We know many farmers are interested in integrating trees into their farms, but there is a need for some balance.



“Though less than the sheep and beef industry, forestry does create jobs and export revenue. In contrast, carbon farming doesn’t create jobs or add export returns.



“Production forestry, in combination with carbon forestry, can often be integrated into sheep and beef farms without loss of food production.



“We also recognise the unique circumstances of some Māori landowners who can never sell their land. This is a legitimate instance where carbon credits from offsetting should be available.”



McIvor says the impact of land use change is now being reflected in livestock numbers with Statistics New Zealand’s 2022 Ag Census data showing the national sheep flock to be 25.3 million as of June 2022, a drop of 400,000 from the previous year with numbers likely to fall further due to new plantings.



MPI’s Afforestation and Deforestation report, which focuses on larger scale planting, supports B+LNZ’s findings.



“While whole farm sales seemed to have slowed last year, new plantings continued at pace with another 64,000ha of new forestry planted in 2022,” says McIvor.



“MPI have also surveyed foresters’ intentions for 2023 and estimate a further 88,000ha of new planting in 2023. This data reinforces how quickly farms are being converted.



“The Government must urgently work with the sector to implement limits before it’s too late.”



Land-use change from pastoral farming to large-scale forestry update (Orme & Associates Limited): https://beeflambnz.com/sites/default...eview-2023.pdf

[Sideshow Bob]

https://www.nzx.com/announcements/416337

PGW Delivers Positive Trading Performance in Volatile Market

GROUP PERFORMANCE

PGG Wrightson Limited1 (PGW) today announced its results for the financial year ended 30 June 2023.

Financial highlights for the year to 30 June 2023 included:

 Operating EBITDA2 of $61.2 million (down $6.0 million or 9% on prior financial year)
 Net profit after tax (NPAT) of $17.5 million (down $6.8 million or 28% on prior financial year)
 Revenue of $975.7 million (up $23.0 million or 2% on prior financial year)
 Fully imputed final dividend of 10 cents per share (22 cents per share for full year)
 Second-strongest trading performance for the business since the PGW Seeds divestment (bettered only by last year’s record result)

PGW Acting Chair, Mr U Kean Seng said “Against a challenging backdrop, PGW delivered strong financial results for the financial year. Although Operating EBITDA of $61.2 million was down $6.0 million (9 per cent) and NPAT of $17.5 million was down $6.8 million (28 per cent), revenue grew to $975.7 million and was up $23.0 million (2 per cent) compared to the prior year. These results were realised with margins broadly in line with the comparative period. This is the second-strongest trading performance for the business in recent years and bettered only by last year’s record result.

The resilient performance of PGW in volatile market conditions is perhaps the most pleasing aspect of the result. Strong operating performance was generated by most business units with Livestock, Wool, and Water all experiencing solid demand. Rural Supplies and Fruitfed Supplies again experienced a standout performance. The exception was our Real Estate business which continues to operate in difficult market conditions.
 
Macro trading conditions for the year have been volatile with increasing input costs, inflationary pressures, and falling commodity returns for our clients., A wet and cold spring delivered frosts which affected a number of crops. Two cyclones through late summer also resulted in significant crop and rural infrastructure damage in the North Island.

In the context of these market conditions, we are heartened by the performance of the business and what has been achieved this financial year. We are proud of the way our team responded to the demands experienced in their regions and the extraordinary efforts of many in the way they supported each other, our clients, and their communities in need.

The Board has declared a fully imputed final dividend of 10 cents per share. The dividend will be paid on 3 October 2023 to shareholders on PGW’s share register as at 5pm on 15 September 2023. This will effectively bring the total fully imputed dividends for the year up to 22 cents per share.”

Retail & Water Group

PGW CEO, Stephen Guerin said, “The Retail & Water business incorporates Rural Supplies, Fruitfed Supplies, Water, and Agritrade. Retail & Water’s Operating EBITDA was an impressive $54.1 million and up $1.6 million on the prior year (or 3 per cent). Revenue of $785.3 million, was up $24.0 million or 3 per cent.

This financial year has been another record year for our Retail & Water businesses. Increased sales were recorded in the animal health, fencing, general merchandise, and horticultural categories.

We transacted increased business volumes with the same level of staff, which is something we are very proud of and testament to the commitment of our team members.

Our clients appreciate the superior technical ability of our people who are backed by our dedicated Research and Development team. We will continue to build on this point of difference to ensure we maintain and increase our market share.

Global supply chain disruptions following COVID-19 caused us to carry higher levels of inventory to ensure we could provide our clients with the right products at the right time. Elevated inventory levels caused some challenges with storage and working capital management. As international shipping delays are easing there is more certainty regarding deliveries. We have adjusted inventory levels given that we do not need to carry the same quantities of buffer stock as was considered necessary in the prior year.

Rural Supplies recorded its best performance ever exceeding last year’s record result, with strong sales across a range of categories. We continued to grow market share and delivered an outstanding result in a shrinking market. To achieve growth on last year is an exceptional result given the climatic challenges and demonstrates the strength of our Rural Supplies business.

Our people are passionate and motivated to go the extra mile for our hardworking clients. We are winning new business and seeking opportunities with key accounts, in animal health, forestry, and the ever-changing landscape of our traditional business.

The wet spring contributed to additional Ag chem sales in our Fruitfed Supplies winery and horticultural merchandise business. Our market share also increased in the vegetable sector which is an important area we have targeted for growth.

The damage caused by spring frosts and floods across parts of the North Island and the impacts from Cyclone Gabrielle in the Tairāwhiti and Hawke’s Bay regions will impact the Fruitfed Supplies business over the next few seasons. However, the long-term outlook for horticulture remains positive.
Our Fruitfed Supplies strategic plan focuses on adapting to changes in the industry, capitalising on category growth, and how we can proactively and strategically adapt to land use change.

The Water business’ strategic focus is to add value to our clients’ businesses by growing service delivery and the best technical advice. We are the market leader with the most technically skilled workforce as verified by Valley and the only current Valley Certified Field Technicians and Certified Valley Designers in the country.
Our Sales and Design crew are actively targeting irrigator upgrade options and enquiries for infill irrigation are increasing, specifically where clients see the benefit of fixed grid solutions.

Agritrade, our wholesale business division, celebrated its 10-year anniversary in September 2022 and showed good growth over this period. This past financial year has seen another lift in sales revenue with growth across horticultural inputs and animal health products. Our range continues to expand as suppliers look to us to supply product given our large logistics function and growing reach to merchants and vets across the country.

Agency Group

Our Agency group incorporates the Livestock, Wool, and Real Estate businesses. Operating EBITDA was $16.1 million and was down $5.8 million on the prior year’s strong result (26 per cent). Revenue was $188.8 million, which was broadly in line with the prior year’s result, down just $0.6 million.

Our Livestock business achieved a solid performance in a difficult market. Whilst there were challenges through softer sheep pricing, significant wet weather events in the North Island and declining tallies in some stock lines, there were also positive outcomes for the year. The wet conditions contributed to greater pasture growth than normal which created unseasonal trading during the summer and autumn seasons.

Revenues received for cattle were robust, with higher prices received compared to the prior year. This was driven by healthy pricing achieved throughout the year which was assisted by abundant feed and increases in export volumes. Sheep pricing was below expectations throughout much of the year as demand was slow to recover in our key export markets.

GO-STOCK, our grazing programme which frees up capital in order that farmers can invest in other areas of their businesses, achieved another record year with the highest balances recorded in terms of values and tallies. GO-BEEF, including the new GO-BEEF PRIME offering, and GO-STOCK DAIRY performed well. During FY23, two significant milestones were reached with over 350,000 cattle and 2.3 million lambs purchased through GO-STOCK since its launch during the 2016 financial year.

The PGW Velvet business delivered a strong performance, achieving its best result ever. This was achieved through increases in volumes traded with South Korean health food customers. China’s extended shutdown caused slower sales which reduced prices on the prior year. With all velvet stock sold and exported, it remains a profitable income stream for deer clients and continues to grow in both production and quality.

The Genetics business achieved some outstanding results with its bull sales. The team is investigating the value add of a “beef over dairy” strategy which will benefit dairy farmers seeking genetics that shorten gestation, maximise ease of birth, and increase profitability of cattle.

Overall, the Wool business had a solid year with total bales procured into stores in line with last year. Wool growers continue to be negatively impacted by cross-bred wool prices. PGW Wool had another steady fine wool season, growing market share supported by high value long-term merino contracts with growers.

The real estate market has experienced one of the toughest years in some time with high interest rates, stricter regulatory requirements, softening commodity prices, and uncertainty regarding the outcome of the general election in October 2023 all contributing to negative sentiment.

This was reflected in operating results for PGW’s Real Estate with the decline in market activity leading to significantly fewer sales being made than in the prior financial year. On the positive side, we maintained our market share and increased share in some regions.”

Cashflow and Debt

Mr U reported that “PGW recorded operating cash flows during the year of $25.5 million, which was $1.8 million higher than the prior year, impacted by higher income tax payments on last year’s exceptional result together with higher funding costs.

PGW invested in working capital during the year, including implementation of our strategy to grow our GO-STOCK receivables book to $74.0 million at 30 June 2023, an increase of $7.9 million or 12.0 per cent from 30 June 2022.

Capital expenditure of $17.1 million was $8.4 million higher than 30 June 2022. This increase was driven by the significant investment in our IT Systems Business Improvement Programme (which includes both operating expenditure and capital expenditure components) and is due to go-live in the 2024 financial year.
Our net interest-bearing debt was $65.3 million as at 30 June 2023, an increase of $32.5 million from the prior comparative period.”

Outlook

Mr U noted, “There is a significant degree of volatility in the global economy and international markets currently. New Zealand, like many of our key trading partner nations are committed to taming inflation with Central banks lifting interest rates. The effect of this monetary policy is being felt with inflation levels beginning to trend lower but with elevated interest rates raising borrowing costs.

Growth in emerging economies is forecast to increase faster than developed countries. The longer-term outlook is positive with the government projecting steady growth for New Zealand primary exports and revenue projected to reach $62 billion by 2027. As a market leader in the sector, PGW is in a strong position to assist our clients grow their businesses as they respond to export demand.

Our country’s farmers and growers are renowned for their resourcefulness and their pioneering spirit continues with creating new solutions to adapt to climate change and become more efficient. Regardless of the regulatory framework that is ultimately adopted, the primary sector will adapt and continue to enhance its social licence to operate. PGW is on a journey to reduce its emissions and has committed to a 30% reduction target by FY30 from our FY21 baseline. This emissions target is part of the broader Sustainability Strategy to embed sustainability within our operations and ensure PGW remains future focused.

It is too soon to forecast trading performance for the year, but we hope to be better placed to provide guidance for FY24 following the start of the important spring trading period at our Annual Shareholders’ Meeting in October 2023. In the meantime, we do note the following positive signals:

 PGW continues to pick up market share and we see this in key categories and in new client enquiry and business.
 Maize orders for the coming spring are strong and tracking ahead of the same time last year.
 The viticulture sector had a good harvest and New Zealand wines are in demand internationally with new plantings planned and Fruitfed Supplies well placed to support the growers.

While we are well positioned operationally as we move into the current financial year, we see continuing volatility and softening commodity prices for our clients and even more challenging macro market conditions out over the short to medium term than experienced in recent years.”

[winner69]

NPAT down 18% on last year but amazingly this year so many records broken and positivity exudes

“Record” used 9 times (a few related last years record) / “positive” 6 times with the odd ‘exceptional”

All in all a positive result …..and looking good for the future

[Sideshow Bob]

Say it enough times, it becomes true.

[winner69]

Operating Cash Flow reported as $25.5m

But when you take off the $19.5m of lease/rent payments it’s really on $6.0m …but ‘positive’ so no worries

After capex Free Cash Flow was negative $10.8m ( cash burn)

Paid dividends of $21.8m so not funded by cash flows

Could say they increased debt by $33m to pay for the Dividend and throw a bit more into GO-STOCK

No doubt me ol mate Snoops will see things differently.

[BlackPeter]

If this 13 nations ‘commitment’ cum agreement to vastly limit livestock farming in order to save the planet gets a foothold in NZ PGW might need to reinvent themselves away from being a rural outfit.

Good the farmers in Netherlands are putting up a big fight

Mind you we seem to be already heading that way ..pretty fast

Biden’s ‘Climate Czar’ John Kerry seems to be leading the charge on this globally ….. suppose it will be better to starve before we burn.

Somewhat outside the scope of this thread ... but I assume you realise that the world could easily produce sufficient food for everybody and at the same time reduce its carbon footprint. If we all just reduce our intake of meat and eat more local produced veges and fruits, if we all stop to wage stupid wars and replace greed and selfishness with consideration for the well being of the globe, it would be a piece of cake to go to carbon neutral and feed everybody.

I don't think the alternative is "starve or burn" ... and NZ certainly could stay a premium producer of agricultural products in a carbon neutral environment. Not sure why anybody would think that we really need to keep intensifying the production of meat and other animal products to prevent the globe from starving?

[Balance]

Somewhat outside the scope of this thread ... but I assume you realise that the world could easily produce sufficient food for everybody and at the same time reduce its carbon footprint. If we all just reduce our intake of meat and eat more local produced veges and fruits, if we all stop to wage stupid wars and replace greed and selfishness with consideration for the well being of the globe, it would be a piece of cake to go to carbon neutral and feed everybody.

I don't think the alternative is "starve or burn" ... and NZ certainly could stay a premium producer of agricultural products in a carbon neutral environment. Not sure why anybody would think that we really need to keep intensifying the production of meat and other animal products to prevent the globe from starving?

Imagine there’s no heaven …

It’s easy if you try.

No hell below us, above us only sky ….

Imagine all the people, living life in peace ..

Etc

Etc

[Sideshow Bob]

http://nzx-prod-s7fsd7f98s.s3-websit...647/400786.pdf

Elders buying a few more.....from 11.3 to 12.3%

[Snow Leopard]

http://nzx-prod-s7fsd7f98s.s3-websit...647/400786.pdf

Elders buying a few more.....from 11.3 to 12.3%

At this rate Elders will have to do the formal takeover thing in Oct 2028.

[winner69]

Last year PGW were very proud that they had “ Achieved CPI normalised EBIT growth of 29%”

Just as well they didn’t stay with this CPI normalised stuff this year ….the EBIT decline of 11% would have been 18%

And revenues didn’t keep with inflation either so no doubt they’ve given up on clever reporting