nz farming systems Uruguay

[duncan macgregor]

SNOOPY, It is to late for Norgate to sell out. NZS is a poor investment for the shareholders who understand the low return in farming. PGW should come out of it alright with a big increase in export sales at the expence of the mug city share holders who will get burned by holding NZS. Norgate expanded to quick taking on to much debt when times were good, now he has to pay the piper. I will tell you one more time farming has a return of about four or five pc on capital plus a capital gain. To borrow money expecting a high return paying a manager is a fools investment. Take a closer look at the NZ companies records going overseas thinking they know it all then think again. Macdunk

[Snoopy]

SNOOPY, It is too late for Norgate to sell out. NZS is a poor investment for the shareholders who understand the low return in farming. PGW should come out of it alright with a big increase in export sales at the expense of the mug city share holders who will get burned by holding NZS. Norgate expanded too quick taking on to much debt when times were good, now he has to pay the piper. I will tell you one more time farming has a return of about four or five pc on capital plus a capital gain. To borrow money expecting a high return paying a manager is a fools investment. Take a closer look at the NZ companies records going overseas thinking they know it all then think again.

Macdunk, NZS has been structured so that it is designed to operate with no debt. NZS did take on significant debt when their shares were only partly paid. This debt was repaid when shareholders fronted up with the rest of their subscription money.

NZS have recently established a debt facility with Uruguayan banks, which makes sense because they operate in Uruguay. But generally they are using earnings from their farming operations in Uruguay, which are a lot higher than 3%, to fund their expansion. No doubt they will go into operational debt to fund the timing difference between when they pay their farm input costs and when they cream off the profits, if you will excuse the pun. But as a general policy, as I understand it, the idea is to operate NZS as a debt free entity, with individual shareholders deciding how much debt they are comfortable with to borrow to fund buying the shares.

In my case I haven't borrowed anything, so from my perspective NZS is virtually a debt free company. In the case of Norgate, if I have unravelled his share transaction dealings correctly, he now holds his NZS stake via PGG Wrightson, which has significant debt in its own right. And Norgate's PGG Wrightson shareholding is owned by Norgate's Rural Portfolio Investments which is an almost entirely debt funded house of cards. At the moment Norgate is many times richer than I am. By the end of the year it might be a closer contest, and I say that not anticipating any great change in my own wealth! That means I agree with you that Norgate may be in trouble. But any problems he has, real or imagined, will not affect the operational performance of NZS.

Once again the real risk picture is the opposite of what you paint. It is PGW that is the more risky investment, simply because of the much higher debt levels that company carries. However, with a PE of 4 and interest rates on the way down, I do still regard PGW shares as a good bet, albeit a riskier one than NZS.

SNOOPY

discl: hold NZS, PGW

[BRICKS]

NOW what about the share price of 60 cents is it a time to BUY or talk in silly
point talking DRIBBLE..

[duncan macgregor]

SNOOPY, It is to late for Norgate to sell out. NZS is a poor investment for the shareholders who understand the low return in farming. PGW should come out of it alright with a big increase in export sales at the expence of the mug city share holders who will get burned by holding NZS. Norgate expanded to quick taking on to much debt when times were good, now he has to pay the piper. I will tell you one more time farming has a return of about four or five pc on capital plus a capital gain. To borrow money expecting a high return paying a manager is a fools investment. Take a closer look at the NZ companies records going overseas thinking they know it all then think again. Macdunk

It looks like the pigeons are coming home to roost. Another NZ company getting their fingers burned in Australia. PGW now selling up in Aussie but keeping its seed business going. Will they abandon NZS now that dairy farming is in the doldrums?. Your Opinion Snoopy would be rather interesting. Macdunk

[Dr_Who]

It looks like the pigeons are coming home to roost. Another NZ company getting their fingers burned in Australia. PGW now selling up in Aussie but keeping its seed business going. Will they abandon NZS now that dairy farming is in the doldrums?. Your Opinion Snoopy would be rather interesting. Macdunk

Nothing new, they are just joining all the other NZ companies who have tried going global... eg: WHS, TEL... etc

[Snoopy]

It looks like the pigeons are coming home to roost. Another NZ company getting their fingers burned in Australia. PGW now selling up in Aussie but keeping its seed business going. Will they abandon NZS now that dairy farming is in the doldrums?. Your Opinion Snoopy would be rather interesting. Macdunk

PGW moved into Australian real estate and livestock (principally in the state of Victoria) at the demand of their New Zealand customers Duncan. If the NZ customers (read farmers) no longer have the cash and borrowing capacity to buy farms and livestock in Australia, then I guess it doesn't make sense to stay there. PGW are actually very responsive to the needs of their customers, principally NZ beef and sheep farmers.

39 staff from four locations in Australia will lose their jobs. But to put that into perspective PGW has 300 real estate sales staff over 61 offices and 290 livestock representatives within New Zealand. I think the big story here is not that PGW are pulling out of Australia. They aren't. The seeds division is still expanding in Australia: PGW bought Auswest Seeds and Keith Seeds in the last financial year. The shock is that the confidence from NZ farmers is so low that PGW need to take such drastic action.

As for PGW abandonning NZS, well I suppose PGW could sell their NZS shareholding to repay some debt. But that sale would be at a loss. After such a high profile NZS capital raising I don't think PGW will be selling unless they have to. I can't see them selling the stake while Norgate remains PGW chairman.

As far as NZS having to curtail their operations because of any trouble PGW might get into.... Well NZS is an independently listed company with its own board. The future of NZS is no longer joined at the hip with the fate of PGW. Remember NZS was not set up purely with dairy in mind. The original prospectus put almost equal weight on the ability of good South American land to raise livestock. Besides I am fairly sure that dairy is still profitable in Uruguay, despite what has been happening in N.Z to our farmers. The lower the milk price goes in dollar terms, the more economic sense NZS makes. I would say NZS is here to stay.

SNOOPY

[Financially dependant]

Who needs irrigation if you have rain!

http://www.sharechat.co.nz/news/scne...e.php/c9259696

I have had a good chat a couple of weeks ago with someone who has been to Uruguay as an adviser, he was very impressed with the managers that run the farms (some are qualified Vets) and believe that it will succeed very well. The main problem is the contractors that install irrigation etc are really slack and work on there own time-frame.

NZS is now on my watch list!

[winner69]

This years loss going to be double what they said a few months ago ..... maybe ..... maybe macdunk was right with this one