https://www.pggwre.co.nz/news/dairy-...rket-recovery/
some positive news.
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https://www.pggwre.co.nz/news/dairy-...rket-recovery/
some positive news.
I made a start but got bogged down.Definately not on my radar so I'll leave it there.
There could be green shoots but spring will be slow in my view.
Impacts on Sales
Farm Sales:down 32.3%?
https://www.mpamag.com/nz/news/gener...m-sales/484636
S& B down 60%
Dairy down 30%
https://www.propertybrokers.co.nz/ne...-significantly
Stock Sales
PGG predominately saleyards?
https://www.farmersweekly.co.nz/mark...e-for-concern/
I can’t find recent data but lets assume sheep back 50%? So 50% less commission?
Beef maybe lucky to hold the same?
So overall effect down 25%?
Bad Debts?
https://www.pggwrightson.co.nz/sites...nouncement.pdf
Yes it will be interesting as to who owns the cows?
Sold as going concern?
"Key players: Waitonui Milltrust Agricultural Holdings, Milltrust Agricultural Investments, Future Planet Capital, Gerard Donald, Michael Cotter, Donald McKay, David Ross, Andrew Grenfell, McGrathNicol,StockCo, Farm Source, John Monaghan, Thomas Reeves."
https://www.nbr.co.nz/business/dairy...-receivership/
First 2 in receivorship
https://www.pggwre.co.nz/rural/listings/dairy
The HY2024 downgrade announcement made on 27/02/2024 is here, where specific mention to the lamb price decline was made::
https://www.pggwrightson.co.nz/sites...nouncement.pdf
The specific reference to lamb prices falling 28% is in the HYR2024 on page 4.
The direct reference to this most recent 18/04/2024 downgrade is here:
https://www.pggwrightson.co.nz/sites...ril%202024.pdf
In both of those links, there is no reference to revenue or expected profit margins. I imagine there will be a spreadsheet at PGW HQ with the projected revenue from all the divisions, the associated divisional costs. and the grand total across all divisions that has lead to the downgraded EBITDA forecast. But to try and reverse engineer that back to revenue, well, I think it would be a mission. Particularly so when the highlighted decline in lamb price through the 'agency division umbrella', is mixed in with a weak 'real estate' market and a stronger 'wool agency' profit, as far as the numerical presentations of the results go.
The decision by the Australian government to phase down and then stop live sheep exports by 2028 will mean a lot more sheep being slaughtered in Australia in the intervening time. In more bad news - for our cattle farmers this time -, on May 2nd Brazil declared itself foot and mouth disease free. This will open up the World Organization for Animal Health (WOAH) to give the tick to cattle exports from Brazil as early as August 2024. Such a tick will open up the international markets to Brazilian farmers, including those markets where NZ farmers enjoy good trade presently. Outside of the United States, Brazil is the world's largest producer of cattle. This does not bode well for the price to be received by NZ cattle farmers in the future. If I combine these projections with the likely continuing of current turnover trends in the wool and real estate markets, I am forecasting 'no change' for the position of 'PGW Agency' in 2025. Thus the idea of looking at what happens if the revenue in this division were to change becomes moot.
SNOOPY
So first 6 months EBITA $36.6m,full year $43m
Is it usually that seasonal or a telling 2 nd half?
They do mention comparable to the 80's
In the 80's rural NZ was littered with ghost towns.
Having said that I am concentrating on EBITDA as the base data figure to use in my profit forecasts, I am using revenues when I speculate on the recovery of the 'retail and water' division over FY2025. Specifically I am comparing the revenues over FY2023 and FY2024.
'Retail and Water' revenues totalled ($785.298m-$1.151m-$0.363m)=$783.784m over FY2023 (AR2023 p66)
'Retail and Water' revenues have not been disclosed for FY2024 (obviously because the FY2024 year which ends on 30th June is not yet concluded). However the first half year revenues for 'retail and water' have been disclosed to be $478.301m. There is a long established pattern of the second half being weaker than the first half. If we use the same half split that occurred over FY2023 of 64%/36%, that means we can estimate the revenue for FY2024 to come in at: ($478.301m-$0.387m-$0.207m)/0.64=$746.417m
This means we can estimate the drop off in revenue of the Retail and Water division between FY2023 and FY2024 to be: $783.784m-$746.417m=$37.367m
If we go back to the Segmented Result for FY2023, (AR2023 p66), we can work out the 'Operating EBITDA margin' for 'Retail & Water': $54.129m/$785.298m= 6.9%.
We know the incremental revenue to model. We know the EBITDA margin. But we also know that horticulture is liable to make up only 35% of that FY2023 Retail and Water total (1). So if we assume that horticulture is the only sector that PGW services that bounces (the rest stay at depressed FY2024 levels) that means the expected EBITDA recovery over FY2025 is: 0.069 x 0.35 x $37.367m = $1m.
So in this small way, I am using changes revenues to estimate my modelled bounce back in profits. That may not be going into the modelling detail you suggested Ferg. But this level of detail, modelling revenue, works for me.
Notes
(1) Cross referencing back to AR2013, the last time Fruitfed revenue was individually disclosed, it made revenue of $128.712m, which equated to 20.3% of the adjusted 'Retail & Water' total. Fruitfed has been a rising star at PGW over ten years. So I suspect the proportionate total of retail today from growers is much higher, perhaps 35% if we include the contribution from irrigation which has now moved under the 'Retail and Water' umbrella. That still leaves 65% of business done with animal farmers though.
SNOOPY
Yes it is usually seasonal but not to that extent.
The EBITDA skew forecast over FY2024 is $36.6m/$6.4m or 85%/15% first half to second half
The EBITDA skew over FY2023, a more normal year, was $47.8m/$13.4m or 78%/22% first half to second half
The explanation is that most of the goods for sale fly out the door in the first half so farmers can pamper their land in the Spring. Retail and water is by far the dominant division in terms of dollars through the cash register. But interestingly, 'Agency' is weighted to the second half, because that is when the fattened up livestock goes through the saleyards.
Sensationalized journalism, alive and well in NZ?
SNOOPY
Farm Sales Data
"April Rural Data: Rural Sales On The Rise"
https://business.scoop.co.nz/2024/05...e/#more-238813
Interesting no breeding farms data in list.They would be the back bone of the rural economy?
Typically they would be over 300 ha?
Banking facility notes (typically found in either note 9 or 10 in the respective annual reports) can be rather a dry foot note to the annual figures and may end up not telling shareholders much. But if we look at such numbers over multiple sequential reporting dates, then longer term patterns can emerge. Such patterns can tell the story of how happy the banking syndicate really is with PGG Wrightson - a topic that rarely, if ever, is given any 'descriptive text time' in the annual report. So what can we deduce about the relationship of PGW with their bankers from the summary table of 'banking facilities drawn' and 'banking facilities offered' below?
EOHY2024 EOFY2023 EOFY2022 EOFY2021 EOFY2020 PGG Wrightson Cash Balance $13.307m $4.643m $4.676m $3.367m $16.868m Term Debt Facility (Amount Drawn) $90m($45.19m) $90m($50m) $60m($30m) $60m($0m) $50m($20m) Working Capital Facility (Amount Drawn) $70m($65m) $70m($19.96m) $70m($7.50m) $70m($9.90m) $70m($30m) Overdraft Facility (Amount Drawn) $3.0m($0m) $3.0m($0m) $3.0m($0m) $3.0m($0m) $3.0m($0m) Letter of Credit (Amount Drawn) $NAm($3.77mm) $NAm($3.77m) $NAm($3.58m) $NAm($3,53m) $NAm($3.58m) Total Facility Limit (Amount Drawn) $163m($114m) $163m($74m) $133m($41m) $133m($13m) $123m($54m) Banking Syndicate Loans (Balance Sheet) $110.190m $69.960m $37.500m $9.900m $50.000m
Notes
1/ The 'Overdraft facilities' and the ''Guarantee Letters of Credit Finance Facilities', collectively known as the 'Syndicated Facilities' are there to fund:
1i/ The general corporate activities of the group.
1ii/ The seasonal fluctuations of working capital.
1iii/ The 'GoLivestock' lending program.
2/ Working Capital Facilities are said to be subject to an 'annual clean down'. I am not sure what this means (see post 5746). I think of working capital as a means of buying goods for on sale to customers. Being a seasonal business, PGW buys in stock for farmers to buy to 'put on the farm' (mostly) in Spring. It then hopes to recoup that money -with some profit- at the end of the business year. I doubt that every stock item brought into the company in any particular financial year is sold by the end of that year. So I am imagining an 'annual clean down' as something like a stock take, but simultaneously confirming the goods left on the shelves are in fact still salable (i.e. are not 'dead stock'). IOW the working capital itself that bought the unsold stock is 'still alive'.
3/ The Overdraft balances drawn at EOFY2022, EOFY2021 and EOFY2020 were not specifically declared. However because the short term loan balance was declared at the end of each of those years in the balance sheet, and it equated exactly to the Working Capital separately declared, I can deduce that the 'overdraft loan balance' must have been zero on those three given reference dates.
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Readers will notice that the 'Amount drawn against total facilities' and the banking syndicate total loans as measured on the balance sheet do not exactly match. The difference is the 'Letter of Credit' guarantee which is effectively an off balance sheet debt that may be called in should circumstances determine there be a need to do that.
Net debt has certainly blown out over the last few reporting periods from a low of $10m at EOFY2021 to $100m at EOHY2024. However there has been no tightening of the bank imposed debt caps over that time. On the contrary, the total amount able to be borrowed has expanded by $40m over four years. The banks would not have done this unless they were confident the PGW business could look after the security of their loan money. It will be interesting to see if this changes once the EOFY2024 has rolled over and the annual results are collated and submitted to those 'friendly bankers'. But as of now, this picture is showing me that the banks are on good terms with PGW. They understand the multi-year seasonal trends that such a business is subject to, and they are quite happy to keep on supporting PGG Wrightson 'through the trough'.
SNOOPY