Poor weather has impacted crop yields in recent seasons, leading to liquidity issues and tighter credit rules for farmers, PGW chief executive Ian Glasson said.
This has impacted on the group’s AgroCentro retail joint-venture in Uruguay, and to safeguard the business PGW is now buying out the remaining 50% of the company.
The overall Seeds & Grain business – which is in the process of being sold to DLF Seeds – will now have a reduced operating profit (Ebitda) in the six months to December 31, compared to the previous year, and there will be an after-tax loss for the division, Glasson said.
The division had Ebitda of $10.8 million in the December 2017 period and an after-tax profit of $2.7m. Earnings are typically higher in the second half of the year.
The AgroCentro acquisition is due to be settled in late January.
The South American issues will not reduce the purchase price that DLF Seeds is paying for PGW Seeds, Glasson said. This price was based on the value of the business at June 30, 2018. Glasson said PGW was confident the sale would receive the required regulatory and other approvals in the new year.
He confirmed that the group expects a capital gain of about $120m from the sale, flowing through to group after-tax profits.
PGW’s NZ-based Rural Services business (Agency, and Retail and Water) were trading solidly though slightly behind the previous year because of a later start to spring sales, and a delayed recovery from widespread heavy rain in many parts of the country.
