Rural services company PGG Wrightson has managed steady earnings despite losing money during the Covid-19 lockdown, but has scrapped a final dividend in current uncertainty.
The net profit for the year ended June was $7.8 million compared with $131.8m the year before, which reflected the sale of its seeds business. Leaving aside the sale gains, net profit was actually up 58 precent.
A solid first half-year result was undone by a loss of $4.9m in the second half of the year as the pandemic restrictions hit trading.
PGG Wrightson chair Rodger Finlay said the result was pleasing in the circumstances and showed the resilience of the business - with global demand and prices for New Zealand agricultural commodities remaining strong - although the effects of the pandemic were still being felt.
"While we remain optimistic about the prospects for the sector, it is prudent to be wary given the degree of uncertainty being experienced throughout much of the world."
He said the company was being cautious and would not pay a final dividend, but expected to resume payments when markets stabilised.
The main drag on the result as the agency business, which includes its livestock, wool and real estate operations, with demand lower, wool prices and volumes depressed.
"Covid-19 is arguably the most significant issue the wool industry has experienced in a generation and it has impacted the international wool supply chain. This has resulted in a decline in wool demand, orders, and prices across all wool types," chief executive Steve Guerin said.
He said the rural estate market remained difficult, with fewer properties being traded, although the company had managed to increase its market share.
The buoyant horticulture sector and improved turnover for the rural supplies business were among the company's bright spots, with revenue rising nearly 12 percent.
Finlay said there were good demand and prices for key products, but Covid-19 was adding much uncertainty.
"While it is too early to provide guidance about expectations for 2021, there is a healthy measure of optimism with solid production returns continuing in dairy, red meat and horticulture."
However, Forsyth Barr investment analyst Guy Hooper said PGG Wrightson faced a challenging near term outlook.
"Regulatory and economic uncertainty, ongoing Covid-19 impacts, and a tightening in the credit environment continue to create a difficult operating environment which we struggle to see reversing in the near-term."