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Highlights

  • Operating revenue fell 6.12% in FY24 to NZD 915.95 million (from NZD 975.69 million in FY23).
  • Cyclone Gabrielle left agricultural areas unreplanted, hampering recovery.
  • Confidence returning in the dairy sector is boosting activity in real estate for dairy farms.

PGG Wrightson Limited (NZX:PGW), a prominent agricultural services company in New Zealand, saw a significant drop in profit in the financial year 2024 (FY24). While the company's financial performance saw a notable decline, promising developments in the dairy sector provide optimism for future recovery.

Financial Performance Overview

In FY24, the company reported a 6.12% decline in operating revenue, dropping from NZD 975.69 million in FY23 to NZD 915.95 million in FY24. Similarly, gross profit fell by 6.78% to NZD 235.7 million compared to NZD 252.84 million in the previous year.

NPAT during the period dropped by 82.5% to NZD 3.1 million, driven by the negative impact of a one-off non-cash NZD 0.9 million deferred tax expense.

A key driver behind these declines was the underperformance of the retail and water businesses, which accounted for the majority of the revenue contraction. The lingering effects of Cyclone Gabrielle further exacerbated the situation, leaving some agricultural areas unreplanted and limiting recovery efforts. Additionally, a period of austerity in the sector saw a reduction in non-essential and discretionary spending, further impacting PGW's profitability.

Positives: Strong Liquidity Metrics

Despite the challenging fiscal year, PGW demonstrated decent liquidity metrics that outperformed industry benchmarks. The company's quick ratio stood at 1.17x, surpassing the industry median of 1.01x, while the current ratio reached 1.73x, compared to the industry median of 1.42x.

Negatives: Margins Under Pressure

The net margin was a mere 0.3%, significantly lower than the industry median of 5.0%. Similarly, the EBITDA margin stood at 4.8%, falling far short of the industry average of 10.8%.

Promising Outlook for the Dairy Sector

Confidence is returning i the dairy sector, spurring increased inquiries and activity in the company's real estate business for dairy farms and support properties. Moreover, the company is expected to benefit from strong beef prices with positive export demand.

The company also mentioned that New Zealand’s rural servicing market is expected to remain challenging and geopolitical tensions add cautiousness in the market.

Considering both negative and positive aspects, the board of PGW expects to deliver an operating EBITDA of nearly NZD 51 million for the year to 30 June 2025.

Share performance of PGW

PGW shares closed 0.65% lower at NZD 1.53 per share on 30 December 2024. Over the past year, PGW’s share price has dropped by 54.99%, while in the last three months, the share price has declined by 14.99%.

52-week high of KMD is NZD 3.44, recorded on 8 January 2024, and 52-week low is NZD 1.45, recorded on 17 June 2024.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 30, 2024. The reference data in this report has been partly sourced from EODHD/Others.