PGW - PGG Wrightson

[Snoopy]

Thanks for that. I am a hobby farmer, used PGW and my local shop is very helpful and I like what I see there. Maybe its different elsewhere.

I loosely supervise a couple of vege patches. Does that qualify me as a hobby farmer? Probably not. But on what has become my annual visit to my local PGW store here in Christchurch I am always treated respectfully. Furthermore the staff have always been able to answer my 'agtech' questions. Back in the day (which, gulp, may have been when PGG Wrightson was just Wrightson) I used to buy quite a bit of clothing there too, although that was when they had lots of NZ made clothing. I don't bother now, they have gone down the import clothing route like everyone else (that unique selling point disappeared).

One of my investment criteria is "Don't invest in a company that you wouldn't be happy to be a customer of yourself." PGW ticks that box for me.

SNOOPY

discl: holder

[kiora]

This is not good for S & B NZ outlook for present & next year

"Meat & Livestock Australia (MLA) is forecasting lamb production will this year reach 621,000 tonnes, a 9% increase on 2023, and the fourth successive year of record production. If achieved, the 2024 production will be 21.3% above the 10-year average."
https://www.farmersweekly.co.nz/mark...year%20average.
https://www.mla.com.au/globalassets/...ons_280224.pdf

Yeah right ? I don't think so ! That's not what I've been hearing

"Banks confident in agricultural clients as more non-dairy loans become distressed
The country’s major banks are confident their farming clients ar well positioned to cope with prolonged weakness in commodity prices putting pressure on bottom lines.

That's despite the Reserve Bank of NZ (RBNZ) highlighting that stress in agricultural loans outside the dairy sector is at its highest in more than 10 years"
https://businessdesk.co.nz/article/p...4229-446239310

[kiora]

"It's a major crisis."

Farmers were cutting costs where possible, but some costs - like rates - could not be, Barton said. He quoted his South Wairarapa District Council rates, which were due to increase 15.3 percent. His insurance bill had jumped four-fold in eight years."
""I'm aware of one business where there's $120,000 of lime and fertiliser that won't be going on"

"And the same farm still ends up with an $88,000 deficit."
""It's looking challenging for the lamb sector and the mutton sector. We're not really expecting any improvement in international prices in the next 12 months or so, so cash flows are likely to deteriorate even further over that time. Some people are finding it hard to see the light at the end of the tunnel."

There was a big slowdown in tractor sales and fertiliser use, while repairs and maintenance were being deferred, Kilsby said"
"He knew of farmers working off-farm to make the books balance."

https://www.rnz.co.nz/news/business/...ay+11+May+2024

[Toddy]

I was listening to RNZ on Friday lunchtime. An Eastcoast farmer was explaining about wheat crops etc still in the ground. Said they lose money trucking to Hamilton at today's prices. Said also the big NZ manufactures are importing subsidised European wheat at cheaper prices.

Add to this the dry weather forecasts.

Things are very sick in rural NZ. And it hasn't really played out yet.

[mistymountain]

I was listening to RNZ on Friday lunchtime. An Eastcoast farmer was explaining about wheat crops etc still in the ground. Said they lose money trucking to Hamilton at today's prices. Said also the big NZ manufactures are importing subsidised European wheat at cheaper prices.

Add to this the dry weather forecasts.

Things are very sick in rural NZ. And it hasn't really played out yet.

My brother in law Dairy / Beef Farmer almost crying on my shoulder due to Work Load Stress caused by debt and the interest bill on it. Rather than lecturing on the Risks of debt in a low interest environment since 2008 GFC 1 , I just listened and sympathised.

He is mid 50's with a intergenerational farming experience...

[Balance]

I was listening to RNZ on Friday lunchtime. An Eastcoast farmer was explaining about wheat crops etc still in the ground. Said they lose money trucking to Hamilton at today's prices. Said also the big NZ manufactures are importing subsidised European wheat at cheaper prices.

Add to this the dry weather forecasts.

Things are very sick in rural NZ. And it hasn't really played out yet.

When have you ever heard from a happy farmer?

On a good year, they did not produce enough.

On a bad year (the seasoned farmers know and prepare for 1 in every 4 years), they produced too much.

Take everything the media present about the farming sector with a pinch of salt.

[Toddy]

When have you ever hear from a happy farmer?

On a good year, they did not produce enough.

On a bad year (the seasoned farmers know and prepare for 1 in every 4 years), they produced too much.

Take everything with a pinch of salt.

The farmer was 'explaining', not 'complaining' .

The bottom line here is that everything farming should be taken in context. When we say farming, what we really mean is 'export dollars' and 'GDP'.

[Balance]

The farmer was 'explaining', not 'complaining' .

The bottom line here is that everything farming should be taken in context. When we say farming, what we really mean is 'export dollars' and 'GDP'.

Fair enough but how are exports doing?

Have look at the following charts and draw your own conclusion :

https://beeflambnz.com/industry-data...e-trend-graphs

[Snoopy]

When have you ever heard from a happy farmer?

On a good year, they did not produce enough.

On a bad year (the seasoned farmers know and prepare for 1 in every 4 years), they produced too much.

Take everything the media present about the farming sector with a pinch of salt.

I take your point about the media. But what about the dictionary? I have taken to reading that now. Look what I found under the 'I' definitions:

Insanity: PGW at $1.53

SNOOPY

[Snoopy]

For those shareholders late to the share register, here is a reprise of why I am not too concerned at the recent share price fall

Amongst this deteriorating financial outlook, you would have expected PGW's banking syndicate to be getting a bit cautious. Maybe they might 'sink the lid' on the amount of capital that PGW can borrow gradually over time, to ensure a disciplined pay back of debt? But no, the opposite has happened. From HYR2024 p26
"On 22nd December 2023 the syndicated bank facility agreement was amended and restated with an effective date of 19 January 2024."
-Term debt facilities are now permitted to grow to $100m (+$10m), with this facility maturing on 27 February 2026. (Amount drawn on this facility @31-12-2023 was $45.19m).
-Working capital facilities are now permitted to grow to $85m (+$15m), with this facility maturing on 27 February 2026. (Amount drawn on this facility @31-12-2023 was $65m).

To put this new 'revised PGW credit limit' into context, the total dividend payout over FY2023 was $21.712m. So it looks like there is plenty of headroom ($55m in long term debt facilities) for a 'new board' -should they be elected- to 'borrow to pay a dividend' - should they so choose, even if the company makes zero NPAT this year. Interesting!

Now I am not expecting a dividend soon. But this is no Synlait. The banks are standing behind PGW. And as far as senior PGW management is concerned 'this is not their first rodeo'.

SNOOPY