Some years ago, 'defined benefit schemes' became an issue overseas. I recall some local reporter doing an article on whether any NZ shareholders should be concerned about the existence of such schemes in NZ companies, and one name stood out: Wrightson. I cannot remember whether it was still Wrightson then, or whether it was the merged 'PGG Wrightson'. But I am not as worried as I was. If we go back to FY2016, the year before the Seeds Division de-merger you can see why:
FY2016 FY2022 Defined Benefit Plan Deficit ($25.729m) ($2.126m) Net Profit Declared $39.678m $24.286m
Back in 2016 the pension scheme deficit was about half the net profit for the year, whereas by 2022 it was only one tenth. So while it is annoying for shareholders that PGW seems to have to keep topping up the defined benefit scheme with one off payments, they appear to be in a much stronger financial position today to be able to do so today. Furthermore those payments are getting smaller in absolute terms too (see my post 5362).
I also know that the actuarial models used to forecast future deficits in the 'defined benefit pension scheme' are not aligned to IFRS reporting rules. This explains why despite the scheme being apparently in surplus at EOFY2021, PGW nevertheless put a $567k payment into the fund over the subsequent year. The IFRS reporting where discount rates were linked to NZ ten year bond rates magnified any future liabilities in 'present day terms', as the ten year bond rate dropped below 1%. However, as ten year bond rates rise again, that 'shadow' should recede. Working against that 'bank rate effect' is the value of the underlying investments used to fund the defined benefit scheme going down as sharemarkets fell. In this circumstance I find myself agreeing with the Snow Leopard. Knowing the position of your 'pension plan market investments' as at 30-06-2022, may not be all that helpful in figuring out the composition of the funding engine now. However, the guys and gals at PGW running the scheme know all about this. So rather than try and 'second guess' what those fund managers should be doing (based on our out of date historical information), I think it is more useful to look at what they did do, while knowing more information than shareholders are privy to.
Again, if we refer back to post 5362, the PGW contributions are well down in the latest three years, compared to the previous three before that. It looks to me that PGW staff do not have an issue with their defined benefit plan as it sits today. And if they are not worried about it, then neither am I!
SNOOPY