Pgg Wrightson Limited · NZX:PGW
Pgg Wrightson — H1 2008 Earnings Presentation
23 slides from Pgg Wrightson's earnings presentation, 2007
Slide 1: PGG Wrightson Limited: Briefing on trading results
PGG Wrightson Limited Briefing on trading results Six months to 31 December 2007
Slide 2: Overview
Overview • Results from operating activities (EBIT) under IFRS up from $23.5m to $48.3m • Excellent result with improvement in most areas, in spite of challenges in operating environment • Benefits emerging from recent investments • NZ Farming Systems Uruguay initiative successful and a positive con
Slide 3: Operating Conditions
Operating Conditions • Dairy boom positive influence • Sheep farm returns low • Continuous improvement generating positive results in Real Estate, Rural Supplies, Fruitfed Supplies and South America • NZFSU investment benefiting from dairy boom • Weather challenges – previous Australian drought and
Slide 4: Farm returns – Dairy
Farm returns – Dairy 10.00 $ / kilo of milk solids 9.00 8.00 6.90 7.00 6.00 5.00 4.25 4.50 4.10 4.46 4.00 3.00 2.00 1.00 0.00 2004 2005 2006 2007 2008 Forecast Source: Fonterra Co-operative Group
Slide 5: Farm returns – Sheep
Farm returns -— Sheep All Classes Sheep and Beef Farm Profit Per Farm, Real $ 2004-05 8 Year 1990s decade av. av. $72,100 $44,800 5 5 oS E o £ . & 1991-92 1997-98 1998-99 - 2000-01 + 2001-02 + 2006-07p 4 2007-08e Source: Meat & WoolNew Zealand, Economic S Sheep and Beef Farm Survey PGG Wrightson
Slide 6: Financial Overview – Profitability
Financial Overview – Profitability** Dec 2007 Dec 2006 $m $m Operating revenue 609.2 523.1 Results from Operating 48.3 23.5* Activities (EBIT) NOPBT 37.7 14.1 Non operating income 5.4 10.3 Associate earnings 1.4 0.7 NPAT 34.6 20.6 * Excludes gain on farm sales of $2.15m reported under GAAP last year
Slide 7: Financial Overview – Balance Sheet
Financial Overview – Balance Sheet Dec 2007 Dec 2006 $m $m Net Finance Receivables 174 95 Other Net Assets 731 681 905 775 Equity 445 416 Debt – Finance Company 124 53 Debt – Rest of Group 336 307 905 776 Group debt increase reflects finance company equity, acquisitions, NZFSU second call ($9m) and
Slide 8: Financial Overview – Cashflow
Financial Overview – Cashflow Dec 2007 Dec 2006 $m $m Operating cash flows (41.8) (36.7) Investing cash flows (47.5) (50.3) Financing cash flows (65.6) (19.6) Net decrease (154.8) (106.6) Operating cash flows reflect H1 working capital requirements Investing cash flows reflect NZFSU shares acquired
Slide 9: Dividend
Dividend • Interim dividend increased from 4 to 5 cents per share • Paid as bonus issue under Distribution Plan commenced in 07 • 44% ($10 m) of 07 final dividend reinvested by shareholders in the form of shares
Slide 10: Business Group Profitability
Business Group Profitability Dec 2007 Dec 2006 $m $m Rural Services 14.6 12.2 Financial Services 23.2* 8.7 Technology Services 10.1 11.0** Overheads (8.6) (8.4) NZFSU share appreciation 9.0 - Results from operating activities 48.3 23.5 (EBIT) *Includes $11.9m for anticipated NZFSU performance fee ba
Slide 11: Rural Services
Rural Services EBIT of $14.6m (2006 $12.2m + 20%) • Livestock – Sheep values hit by dry conditions, competition for finishing land and low confidence levels – Poor sheep returns negatively affect farmers and PGW – Cattle tallies also reduced as farmers retain dairy cattle – Benefits from rise in dai
Slide 12: Rural Services
Rural Services EBIT of $14.6m (2006 $12.2m + 20%) • Rural Supplies / Fruitfed – Restructured management – Drive into dairy – Strong recovery– sales up in a range of categories – Strong first half in Fruitfed • Irrigation & Pumping – Dry weather driving higher sales • Districts – Strengthened Distric
Slide 13: Financial Services
Financial Services EBIT of $23.2m (2006 $8.7m + 167%) • Funds Management – Full six months contribution from NZFSU very positive – NZFSU performance fee of $11.9m • Finance – 14% growth in 6 months in loan book, to $460m – Strengthened funding base: • 3% growth in deposits to $285m • Reinvestment he
Slide 14: Financial Services
Financial Services EBIT of $23.2m (2006 $8.7m + 167%) • Insurance – Steady contribution from ongoing development of JV • Real Estate – Revenue up 43% – Operating earnings up 61% – Continued growth from expansion, business development and strong rural market – Growth in market share in most areas and
Slide 15: Technology Services
Technology Services EBIT of $10.1m (2006 $11.0m -9%) • Agriculture New Zealand – Driver in overall reduction – Down from strong previous period which benefited from chemical handling compliance requirements • Seeds – Keen demand for NZ proprietaries and exports, offsetting impact of Australian droug
Slide 16: NZ Farming Systems Uruguay
NZ Farming Systems Uruguay MANAGEMENT CONTRACTS • Performance fee $11.9m based on share price growth and distributions – Based on share price of $1.50 – Paid in July – option of taking shares or cash by mutual agreement – NPAT impact $8m • Total funds under management increase with further raising o
Slide 17: Key initiatives
Key initiatives Rural Services • Livestock – Ongoing focus in maintaining our number 1 position in dairy – Tight cost control in difficult environment with rep numbers being managed – Targeted investment in certain areas to strengthen network – Development of Australian operations – investing in new
Slide 18: Key initiatives
Key initiatives Rural Services • Wool – Ongoing focus on operational improvement very strong: • Launch of bale dumping project • Dunedin property and store rationalisation – NZ Merino continues to perform well as a successful model – Support of industry initiatives • Rural Supplies / Fruitfed – New
Slide 19: Key initiatives
Key initiatives Financial Services • Finance – Low documentation and Livestock Leasing products – Deposit campaign – investment renewal rates maintained – Increased bank funding lines from $120 to $180m – Other funding options in development • Real Estate – Three new offices in Australia – Continued
Slide 20: Key initiatives
Key initiatives Technology Services • South America – Expanded ACA relationship – Identified further acquisition opportunities (in progress) • Australia – AusWest acquisition – integration well progressed – Invested in new warehouse facilities to support growth • Seed and Grain – Crop and Food JV –
Slide 21: Key initiatives
Key initiatives Technology Services • Agri-feeds – 4 Seasons Molasses acquisition – Sale of terminals and restructured logistics – Focus on demand increase in dairy sector • Agriculture New Zealand – Positioned for regulatory developments – Work with NZFSU on training for farm workers
Slide 22: Outlook
Outlook • Business continues to execute well • Staff morale and confidence strong • Investment ongoing internally and via acquisitions • Benefits will flow progressively • Trading conditions mixed and challenging overall: – High NZ dollar affects returns – Dairy commodity prices remain strong – Shee
Slide 23: Outlook (cont)
Outlook (cont) • Supportive of change in sheep meat sector • Earnings weighted to H2, especially Livestock and Seeds - focus on Dairy will support earnings • On track to achieve forecast range