17 Dec 2008

PGG Wrightson downgrades earnings forecast

12:29 pm on 17 December 2008

A drop in farm and lifestyle property sales has hit PGG Wrightson's real estate business and led to the group downgrading its full-year earnings forecast.

The company has revised its net earnings guidance from between$46 million and $51 million down to between $39 million to $40 million for the year to June.

The reduced earnings would still be an increase of about 15% on last year's result.

PGG Wrightson said the principal reason for the downgrade is the impact of economic conditions on demand for rural properties.

Sales of farms have fallen 39% while lifestyle property sales have fallen 40%. The company's real estate business is now expected to be $11 million below budget.

The PGG Wrightson board said the real estate business is performing as well as can be expected in extremely difficult conditions.

The rural services firm said the group's other businesses are still performing well despite the fall in forecast prices for key agricultural commodities like dairy produce.

It said that is yet to have a significant impact on demand from farmer clients.

The company said its half year earnings will also be affected by an 11% writedown on its investment in New Zealand Farming Systems Uruguay as well as costs associated with the termination of the deal with Silver Fern Farms.