where you do you see support level ?
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There is no support level with a company that has changed as much as PGW. Its a new company in new fields completely different to what it was before norgate got involved. The sp has soared then started to crash, the bottom is anyones guess. It requires some good news to turn it around which seems unlikely in the short term. I would hazard a guess and say into the dollar thirties in the next six months. Macdunk
from a ta perspective
long term rising trendline confirmed.
massively oversold rsi.
diverging rsi
key support line at 170.
if 150 survived another test looks like a possible buy with a tight stop below the trendline .
Norgate should be eternally grateful to his fair-weather bankers for pulling the plug on this marriage made in hell.
The last thing any company needs right now is a share of a debt laden, razor-thin margin making business in a sunset industry. Best they let it fall over, and let the other players pick up the pieces to rationalise this industry
From an operational perspective the Craig Norgate (Chairman) and Tim Miles (Managing Director) 'show' gave a bullish outlook.
With the first quarter results in, Rural Supplies and Fruitfed are well ahead of budget. This is thanks largely to increased demand for agricultural chemicals and seeds. The drought conditions earlier in the year made many farmers try the supplementary animal feed molasses based liquid. It worked so well that many farmers are continuing to use molasses now the drought is over.
The pumping division is either 'going great guns' or 'irrigation booming', depending on whether the dairy farm conversions and viticulture ventures go for a high pressure or a low pressure system respectively.
Finance on a quarter to quarter annual comparative basis is benefitting from the larger capital base built up over the year. The drop in the exchange rate can only work for farmers (and PGW) over the coming year. The one negative was real estate. This had been up over 70% in FY2008. But farm property sales have plunged this quarter to be 'well below budget', although PGW's market share at 30% has been maintained. Finance is anecdotally starting to become a problem.
The full year profit projection must be tempered by the uncertainty of autumn seeds and cow dairy herd sales which traditionally drive the full year result, and most of these sales do not occur until the second half. Given the turbulent world financial conditions, Norgate has maintained the PGW projected profit at $46m-$51m for PGW's underlying operations for FY2009.
There is likely to be a one off write-down on the carrying value of New Zealand Farming Systems (NZS), in which PGW has an 11.2% stake. But this loss is likely to be offset by the gain from selling Wrightson's wool handling business into 40% owned 'The Wool Company'. It was clear that a 'capital gain bonus' to PGW from managing NZS for this year is not likely. The NZS share price would have to average $1.75 from April 2009 to June 2009 for any such bonus to be paid to PGW.
Directors Sam Maling and Brian Joliffe made impassioned pleas for their re-election,as representatives of cornerstone 21.58% shareholder Pyne Gould Corporation. They did make it clear that both supported the Silver Fern Meats transaction. But they also made it clear that should PGCs plan to get a banking licence proceed, the reserve bank would probably demand PGC divest their interest in PGW.
There was a question from the floor as to how ''green" the company was. Norgate replied that he had been waiting for two years for somebody to ask him that as he had sympathy with certain green issues, even if the greenwill sometimes got ahead of the scientific evidence. He said that being a supplier, PGWs own carbon footprint is relatively low. MD Tim Miles jumped in and admitted PGW are not as green as they could be. Road miles travelled by reps may be one area where they can reschedule trips and/or use greener vehicles to reduce the PGW company carbon effect.
Contrary to what you might read in the 'official' AGM reports, Norgate is pulling out all stops to ensure the PGW/SilverFern joint venture meat merger goes ahead. Missing the 30th September 2008 deal funding target means that PGW are now incurring 'interest penalties' until such funding is repackaged and in place. And if the deal *is* called off, PGW will be up for a penalty break free.
Norgate was questioned extensively on the rationale behind the Silver Fern deal. He said it was driven largely by PGW customers the biggest proportion of whom are sheep and beef farmers, as was the 'Wool Partners' deal. He is as passionate as ever about the consumer driven plate to pasture strategy (as opposed to the pasture to plate supplier driven outlook). And farmers, after years of inactive frustration, were looking for a restructuring catalyst like PGW. The meeting closed with Norgate promising to announce new procurement and cash management initiatives in November.
SNOOPY
discl: hold PGW
Expect capital raising to acquire Silver Fern in the near future?
I am wondering what this delay or cancellation of the deal with silver ferns is costing PGW. I understand there is a penalty interest charge because of delayed settlement (on perhaps as much as $145mil)and if the deal would be cancelled then you would expect a fee for breaking an unconditional contract.
Further you think there would be legal fees etc.
Could bite in PGW profits anybody care to put some numbers on them?
I will have a guess. $145m was due on the date of settlement (the missed date of 30th September), while the rest of the $220m ($75m) was due to be settled on 1st March 2009 *plus an interest rate of 10% on the outstanding balance*.
If none of the money is paid up until 1st March 2009, that means interest at 10% on the whole of the outstanding balance for 5 months:
0.1x $220m x 5/12= $9.2m
Provided PGW stitch this deal together, I would predict minimal additional legal fees.
There will be zero additional legal fees if PGW break the contract as well, for what happens in that event is already in the existing contract. There will however be compensation payable.
However, I wouldn't bet on the deal not going ahead. Norgate sounded pretty determined to get the deal done in some form. He used the phrase 'our word is our bond' when speaking on behalf of the board. If Norgate doesn't make the deal, then his deal making reputation will be in tatters. So I think provided the deal can be done using the overseas financiers, this Silver Fern Meats deal *will* go through.
The completely separate deal with cornerstone shareholder PGC becoming a bank throws another ingredient into the mix. If PGC unload their 21.6% stake to one buyer, that buyer will be obliged to make a takeover offer for the rest of the shares in PGW.
SNOOPY
discl: hold PGW
thanks for your report snoopy
Thanks Snoopy, 10% interest for not settling comercial contract could be bit hopefull.
I didn't pull that 10% figure out of a hat Forest. That 10% per annum is the actual interest rate agreed in the contract with Silver Fern Farms (Meats). And just to make things quite clear, that interest rate on the outstanding balance *applies if the contract is settled* after 30th September 2008. Obviously it is now after 30th September 2008, so that interest rate applies.
If the contract is *not settled*, then we have another ball game entirely.
SNOOPY
Glad to hear you haven't thrown yourself under a combine harvestor Mick, what with all the market troubles. Are you still a PGW shareholder?
Here is a weekend puzzle for PGW shareholders to ponder (no I don't know the answer). I am trying to reconcile the divisional EBIT figures quoted throughout the operational review text with the segment reporting information on page 42.
The 'Segment net profit before tax' figures roughly tie in, except in 'Rural Services' where EBIT is $40.1m (p8) and 'Segment Net Profit before Tax' is $24.5m (p42). Why the difference?
SNOOPY
Snoopy, the rural services business is allocated the bulk of liabilities under segment liabilities and I would think therefore incur considerable interest charges.
Financial services is probably less affected by interest on their liabilities as these are offset by interest income from financial assets.
Btw, here's something from the PGC agm yesterday.... I can't quite decide what that first paragraph means in terms of PGW - that PGC doesn't want to keep funding PGW? Or am I misunderstanding that?
Quote:
Most of you will be aware that MARAC operates today with a high level of liquidity in its business. That has been the completely right strategy for us. But as we are presently configured, it is a strategy which creates tension for us because the initiatives in PGG Wrightson which we have supported as completely right for that business and its farmer clients, also make demands for capital.
And looking into the future we do not expect that situation to change. And so we have to rationalise things, but we are in no rush to do so. Our present timing contemplates that we will have the banking licence in place later in this financial year. But if events require it we have some flexibility around this timing. There has been some market speculation that we are about to offload our interest in PGGW. We have no such plans and divestment will not happen without a carefully thought through strategy which secures the best outcome for PGC shareholders.
One of the options we have is for some form of in specie distribution of those shares to PGC shareholders. We are still working through that possibility and others and it is too soon for me to confirm just what the outcome will be.
O.K. Liz, I think I can put those comments into context. Sam Maling the chairman of PGC is also a director of PGW and by co-incidence was up for re-election at the PGW AGM the day before the PGC AGM. In his PGW re-election speech, Maling launched into this long spiel on PGC and how their relationship with PGW, as regards PGW's expansion plans, has been misunderstood by the media.
As you know PGC has plans to become a bank and presumably they will use the 'Marac' brand to do so. I think what is being said is that having PGW, a company that is hungry for investors funds for new initaitives, as a 'client' of the new Marac bank would mean that Marac would not be able to maintain the high level of liquidity desired in today's financial markets.
PGWs industry meat and wool initiatives are long term. 'Marac Bank' could not fund such projects if a whole lot of deposit holders wanted their money 'out' in a years time. It is also possible that having such a large relationship with just one client might be a risk factor for the new 'Marac Bank', that the NZ Reserve Bank that oversees banking licences would not approve of.
My take on what was said at the PGC AGM is that PGC supports the initiatives that PGW is taking as 'right' for PGW and 'right' for major shareholder PGC. But that these plans are not compatible with PGC becoming a bank, given PGC's scale. Thus some form of amicable divorce will be necessary between PGCs future banking activities and PGW.
SNOOPY
Yes, that is how I read it too. That implies PGW will need to renew all or part of their financing at some point via an alternative bank or finance company, doesn't it?
What does this mean in terms of the likely interest rates and conditions they are likely to have? Obviously PGC will be wanting to manage this process so that PGW doesn't lose value in the process, as that affects PGC shareholders. But it sounds like a challenge!
In specie distribution seems like a way of avoiding a negative price spiral on PGW and consequently PGC as PGC tries to exit... but need to see re-financing well-executed to provide some stability for PGW shareholders beyond that?
'Financing' I understand in this context, to be referring to PGW's bank debt. PGW has term bank facilities of $304m and current bank facilities of $174m (AR2008 p28). None of these are with Marac, as Marac is not a bank yet. These facilities will from time to time come up for renegotiation. But these renegotiations will not be crystallised by Marac becoming a bank.
A wider view of 'financing' would see PGC as an 'equity financer' of PGW. If PGC sells down their holding in PGW, then the 'equity financing' of PGW will change. But this would only be a factor if PGW undertook a cash issue. I believe this is unlikely. That is because the largest PGW shareholder 'Rural Portfolio Investments' is heavily debt funded. RPI wouldn't be able to raise the money for a large cash issue. Principal Norgate, who also happens to be chairman of PGW, knows this. So he won't put RPI in a position of having to cough up cash. Equity funding will IMO be done by a placement of shares to institutions, as per the last (failed) offer that got pulled on September 30th.
No effect. See explanation above.Quote:
What does this mean in terms of the likely interest rates and conditions they are likely to have?
I don't think PGC exiting necessarily means a downward price spiral for PGW. If PGC sell their holding in one block, it will mean a takeover offer for PGW by whoever acquires PGC's stake.Quote:
Obviously PGC will be wanting to manage this process so that PGW doesn't lose value in the process, as that affects PGC shareholders. But it sounds like a challenge!
In specie distribution seems like a way of avoiding a negative price spiral on PGW and consequently PGC as PGC tries to exit... but need to see re-financing well-executed to provide some stability for PGW shareholders beyond that?
SNOOPY
discl: hold PGW
Thanks Snoopy. The way I read it, I assumed that some of PGW's borrowings must be with Marac. Good to know that is not the case or behind the need for separation.
Two surprises here:
-----
3 November 2008
Silver Fern Farms/PGW Partnership Agreement Terminated
Silver Fern Farms Limited advises that PGG Wrightson Limited's (PGW) failure to pay the first instalment of $145 million for Silver Fern Farms shares in terms of the partnership proposal agreed between the two companies, has left Silver Fern Farms with no alternative but to terminate the agreement relating to the proposal.
This follows continuous discussions and the inability by PGW to deliver any level of certainty as to a possible settlement date over an adequate period of time, following the settlement default on 1 October 2008.
Silver Fern Farms' Chief Executive Keith Cooper said: "Termination of the agreement was a necessary step to provide certainty to our shareholders and other stakeholders including employees and suppliers. It enables us to move on and see whether any alternative arrangements between Silver Fern Farms and PGW are feasible. We have not determined the amount or form of compensation we will seek to recover from PGW. We expect that if any alternative arrangement is agreed and implemented, then this issue will be addressed as part of those arrangements."
Mr Cooper said Silver Fern Farms' focus remained on making a difference to the future strategy and structure of the NZ red meat industry, with the ultimate aim of improving long term farmer returns. "Aggregation within the wider meat industry, in combination with integrating the supply chain, remains fundamental to achieving that outcome.
"Whilst the merits and value of the transaction in terms of synergies, supply chain management and capital for Silver Fern Farms were significant and unchallengeable, enabling us to expedite our strategy, Silver Fern Farms future is not dependant on the transaction" he said.
------
The first surprise is that Silver Fern has pulled the plug. What a curious thing to do to a 'good faith' partner. Does this mean there is an alternative deal with some other third party on the table? I am also curious that Silver Fern would consider seeking compensation from Norgate, when it is *they* who have pulled out- not him!
The second surprise is that there is not a fixed compensation clause laid down in the existing agreement should it fail.
The other point I note about the press release is that it is rather aggressive in note, yet conciliatory towards PGW in the sense that they are willing to look at an alternative ongoing relationship. IIRC the Grant Samual Report suggested that Norgate's offer was on the generous side of acceptable. Are Silver Fern trying to broker an even more attractive deal - for them? What will Norgate do now? *Can* Norgate do anything, or has the credit crisis permanently cropped his ambitions?
SNOOPY
discl: hold PGW
Why is PGW issuing $75m bond?
Its actually the Finance Company issuing the bond, and taking advantage of the Government's deposit guarantee they have just announced they have been approved for.
PGW is in the same boat as all the other companies that borrow money it seems they forget
you have to pay back so when the market turns they yell "help"..
First Silver Fern and now starting a biz South America spells trouble why they cant stay
at home beets me and the good old profit forecast and say good bye share price so
who is game to BUY..
Yes this is a great time to buy. As far as I know the world has not stopped breeding yet so more mouths to feed every day.
Stock up now for the next rush. Beef and Lamb are both doing better than last year and will make up a little for the loss of Dairy income but remember last year PGW was slammed for not being exposed to enough dairy.
Whats PGW's debt to equity ratio?
Suppose 69 you will be BUYING more now that the price is RIGHT..
Why is PGW sp going up?
Because it has to.
Hope you all stocked up when you had the chance!! See post 27/12
Article in The Herald suggests PGW core debt now bout $400m and $180m needed to be refinanced in next month or 2. That Taylor guy from Macquaries didn't seem too impressed with state of play and suggest a pretty dilutive capital raising is likely ..... just another analyst rave or one that might actually be saying something the company doesn't really want to hear
Quote from http://www.nzherald.co.nz/business/n...0555525&pnum=0
In the wake of its rapid expansion PGG Wrightson and its 30 per cent owner, the Craig Norgate and McConnon family-owned Rural Portfolio Investments, have been talked about as an example of a group that is relatively highly geared.
A number of analysts have raised concerns about PGG Wrightson's debt levels, including Macquarie Equities' Lyall Taylor, who noted in December that its core debt was likely to approach $400 million this year and that it needed to refinance $180 million in debt by April, "against a backdrop of tight credit and earnings momentum slowing to a splutter".
"We see an increasing risk PGGW will need to undertake a dilutive equity raising."
PGG Wrightson chief executive Tim Miles declined to comment, citing the proximity of the company's half-year result later this month.
Taylor also raised concerns about the debt levels at RPI which relies on PGG Wrightson's dividends to service the interest obligations on the $102.5 million in redeemable preference shares it has on issue, $44.6 million of which will also mature in April.
There will, no doubt, be considerable interest in how PGG Wrightson and RPI negotiate the next few months.
Right now in the short term extreme high risk of more down side. This companies prospects have been on a roller coaster ride on the way down with more downside expected than upside. Farmers are struggleing in this environment, PGW follow on from there. Macdunk
pgw don't seem to be having difficulty raising funds in this environment
Sheep and beef farmers (PGW's mian clients) are doing better this yr than last yr as far as prices for their production go
===============================================
PGW
23/12/2008
GENERAL
REL: 1433 HRS PGG Wrightson Limited
GENERAL: PGW: PGG Wrightson Finance Offer Closes Oversubscribed
Announcement
23 December 2008
PGG Wrightson Finance Offer Closes Oversubscribed
PGG Wrightson Finance Limited ("PGG Wrightson Finance") is pleased to
announce that its offer of Secured Bonds has closed oversubscribed with the
Company today allotting the maximum $100 million of Secured Bonds available
under the offer (the "Offer").
The interest rate for the Secured Bonds, which is fixed for their term, was
set on Monday 22 December 2008 at 8.25%.
Mark Darrow, head of PGG Wrightson Finance was delighted with the demand for
the Offer commenting "the level of support we received from brokers,
financial advisers and their investors together with our own shareholders and
clients is a sound endorsement of the quality and reputation of PGG Wrightson
Finance and our position as a leading rural financier in New Zealand".
The proceeds from the Offer will supplement the Company's debenture
programme, which grew more that $80 million this calendar year, and
additional wholesale funding lines that were secured from key banking
partners.
Mr Darrow further commented that "the Company is pleased to be going into
2009 with substantial cash resources, and with a mandate to further increase
our support for the rural community when other rural financiers have become
more constrained due to existing exposures and/or liquidity concerns".
"We would like to acknowledge the Lead Manager and Organising Participant to
the Offer, Forsyth Barr Limited and the Underwriter, Forsyth Barr Group
Limited. We would also like to recognise the support of our shareholders and
clients in achieving this outcome" Mr Darrow concluded.
PGG Wrightson Finance's Secured Bonds will be quoted on the NZDX on Wednesday
24th December 2008 under the security code "PWF030". The Secured Bonds will
join the Company's two other bond issues currently trading under the security
codes "WFL010" and "WFL020" which will, from tomorrow the 24th December 2008,
trade as "PWF010" and "PWF020" respectively.
-Ends-
The article you quoted said that debt might approach $400m "this year" Winner. I reckon we still have nearly 11 months to run. The article said nothing about the figure being $400m now.
Nevertheless the article was enough to get me scurrying to my most recent PGW annual report, FY ended June 2008. Under "Note 4, Segmented Reporting", it showed core Rural Services debt to be $483m. So my reading of this is that debt is currently being *reduced* at PGW right now. Not increased as a casual read of the Herald article might have the reader imply.
As for needing to refinance $180m by April 2009, I would like to know where that figure comes from. Even if true, as recently as August 2008, PGW were planning an debt/equity raising of $220m to acquire a half stake in Silver Fern Farms. So PGW must have been gauging the banks and the markets as a way of raising a similar quantum of funds for at least six months no, even though that particular $220m is no longer needed.
If we look at note 15 on "Cash and Bank Facilities", we note that "Current bank facilities" total $174.3m (is that where the $180m in the Herald article comes from?). Are these current bank facilities renegotiated every year? It all sounds dramatic, until you read that in FY2007 current group bank facilities were $242m. Yet under that strain (?) just one year ago PGW arranged for increased term debt from $74m to $304m. And as at the last balance sheet date, the PGW group was still $130m under their pre-approved debt ceiling, *excluding* the $39m in 15th August to 15th May seasonal facilities. So where is this ‘pressure’ on PGW coming from to renegotiate the full $180m?
Dairy may be in some trouble as unrealistic expansionary expectations are deflated. There will be a rub off in PGW real estate through reduced farm sales. But dairy farmers are not the core of PGW customers. As Mick has noted, those are sheep and beef farmers. And for them, this year is shaping up as rather better than last.
SNOOPY
Discl: hold PGW
Snoopy, Dairy has taken a massive hit. Wool and beef are down farmers are finding it tough. When that happens they stop buying and tread water to survive. PGW depends on farm expenditure to survive. PGW must end up with a reduced profit level in the short term.
I would think the share price would trail farm incomes up or down by about six months. Macdunk
PGW presentation June results had a slide that said core debt was $312m (which excludes PGGW Finance which has bank debt of another $140m) .... thats PGW figures
Is Taylor from Macquaries saying that this the $312m is increasing to $400m then? Would have thought that 'core debt' was 'core debt'
Shouldn't question analysts ... or did the papers just intepret it all wrong
also expect some deeply discounted equity propositions for dairy set ups in the SI. if these are cheap enough and you can stand treading water for a couple of years you should be well rewarded. Im talking 1000 for GOOD cows and 25000 max per ha for converted well irrigated ground.
Had a quick look at their books.
I think you are right to say the debt is $400m with $180m due to roll over in April. Their debt to equity ratio is over 100%. I am wondering how they will roll that debt over in this market. Maybe debt raising or selling off assets? It is a big ask to raise that kind of debt in this market.
No they won't Doc. But remember they still have substantial shareholder the budding bank PGC
"Banking Application to the Reserve bank
Our application to the Reserve Bank for a banking licence is on track but we have
made no commitment as to when this will occur. In the present market we need to
maintain some flexibility around timing.
Likewise with our interest in PGG Wrightson. The business continues to trade well,
and although we have signalled our intention to divest, we would not do so into the
present market. We remain uncommitted to any single path to exit or timeframe."
Looks like PGC will put their plans on hold to support PGW if necessary.
SNOOPY
Have you guys read the AWB profit downgrade? Their sp got hammered.
I wonder if AWB has any implications for PGW? I know their business is different, but maybe a rural sector trend?
Warning trashes AWB share price
http://www.theaustralian.news.com.au...018010,00.html
Historic PE was just over 7 for AWB before today's hammering. A 25% decline in share price will reduce that PE to just over 5 on last years earnings. However the reason for that plunge is that net profit is expected to fall by 45%-55%. That means the forecast AWB PE is now between 9.5 and 11.5.
PGW is still forecasting earnings of $39m. And with the share price at $1.30, PGW is trading on a forecast PE of 9.6, the lower end of the 9.5-11.5 'AWB' range. Based on this we can expect the PGW share price to *rise* on this AWB result, if indeed there is any connection.
SNOOPY
discl: hold PGW
Where did you get the $39 million forecast from Snoopy?
I am just trying to get the average analyst forecast.
Cheers
I believe that it was earnings guidance from PGG Wrightson on 16th December rather than an analyst forecast.
The guidance said:
The Board of PGG Wrightson advises that it has reviewed the group’s net earnings guidance for the year ending 30 June 2009 based on financial performance to date and the current outlook for the remainder of the financial year.
The Board now believes that net earnings are likely to be within the range from $39 million to $45 million. The previous earnings guidance, provided at the Annual Shareholders Meeting in October 2008, was for a range from $46 million to $51 million.
....The Board now believes that net earnings are likely to be within the range from $39 million to $45 million. The previous earnings guidance, provided at the Annual Shareholders Meeting in October 2008, was for a range from $46 million to $51 million.
This could well just be downgrade number one......... A long time from Dec 16 to June 30.
Downgrades that far out have a habit of multiplying.
PGW suddenly drop 6% today.
Whats up?
Something negative maybe? :eek:
isn't that pgc that took a drop today, probably some old dear want a new car and cashed up.... imo there is something or some things negative hanging around pgw..
silverstream farms to be settled.. elders/crt gaining traction on pgw market share.. ++
pgc in bit of hot water due to marac loans to developers...
You guys think PGW will need to do a rights issue to raise capital for debt reduction?
If they do, then Craig Norgates Rural Portfolio Investments won't be able to pay. My guess is no rights issue. I'm guessing that if they go this way they will place a block of shares with a cornerstone shareholder, then have a non-renouncable $5k offer to existing shareholders. IOW a mirror of the Silver Fern Farms deal in the way it would be structured.
SNOOPY
The new capital in the proposed SFF/PGW joint venture was effectively coming from the banks that Craig Norgate thought he had lined up before the credit crunch bit. As a sop to existing PGW shareholders, and to keep the balance sheet more respectable, the plan was to offer up to $5,000 worth of new PGW shares to every shareholder, regardless of how many shares they owned. That $5,000 offer was not renouncable or tradeable. That in turn meant that Norgate via Rural Portfolio Investments (RPI) only needed to front up with around $5,000 to be seen to be supporting the share issue, despite owning around 25% of the company. The net result of it all was that Norgate was looking to raise a significant amount of cash from PGW shareholders, without putting huge amounts of cash in via RPI.
This IMO will be the route Norgate will follow, with any future capital raising. It has to be this way because RPI is a house of cards that does not have the capacity to stump up large sums of cash.
SNOOPY
Thanks Snoopy. This will be interesting to see. I will do more reading on the SFF/PGW proposal when I have time this weekend.
There is money to be made in PGW, but not sure which way, in long or short position.
You might have some interesting vitriol to read over the weekend Doc. I was very surprised at the extent of the spat between PGW and SFF that has broken out in the media today. SFF Chairman not happy and accusing PGW of negotiating a compensation deal through the media!
$10m has been put on the table in cash by PGW and rejected by SFF, even though actual costs incurred by SFF were $3.5m in pursuit of the merger. PGW wants mediation using an ex high court judge. SFF now claims PGW have lost most of their credibility because of this issue, and claims $10m compensation is grossly inadequate. I would have thought the credit crunch breaking out during the week agreements were going to be signed with overseas banks might have something to do with the agreement breaking down? How much of this is just staking out the starting ground before compensation negotiations begin I'm not sure. But it does seem that friendly relations will be difficult after this. Perhaps it was unwise for PGW to go to the media yesterday issuing a press release giving their view of the situation? Personally I think PGW did owe it to their shareholders to keep them fully and quantifiably informed.
SFF claiming that their farmer shareholders who voted overwhelmingly for the merger agreement some six months ago are now luke warm. Have these farmers gone mad or are higher lamb prices due to a declining currency luring them back to the boom bust cycle of thinking? Personally I would have thought an offer of $7m by PGW (double the actual loss) to SFF would have been more than adequate in current circumstances. Still it all explains the PGW share price weakness of the last couple of days.
SNOOPY
discl: hold PGW
Damages in a breach of contract case are not just about cost recovery. PGW wooed SFF with some pretty substantial benefits that they were going to deliver through a merger, and those benefits were, if I recall correctly, disclosed as a lot more than $10m - per annum.
SFF are well practised at slaughtering lambs. This is one lamb which is about to get its throat cut, without facing east and receiving a Halal prayer
Looks like SFF is the nail in the coffin ontop of $400m debt. :eek:
On the other hand they have a dominant position servicing NZ's most important industry. They need to sort themselves out, soon.
Oh God, I feel another ICONIC company bailout candidate coming.....has Craig got Johns phone number? :D:D
Here's David hargreaves take on it:
http://www.stuff.co.nz/4851777a1865.html
An unconditional deal is just that, with all conditions of purchase being agreed upon,
If one party or the other backs out then the injured party can lodge proceedings for the total ammount and more than likely win. PGW can and look like they are trying to come to another agreement over damages which tells me how stupid they were in the first place.
Farming is a peculuar industry which revolves round short lived cycles. When you see beef farms turned into dairy or visa versa you know its time to get out.
Farming in most countries is a peasant occupation, with very little real return on capital.
PGW set investors up in dairy farms overseas in competition with our own farmers, so for that i have very little sympathy for their plight, but feel sorry for the share holders that they succered in. Macdunk
The cost of setting up the farms in South America is very similar to NZ. There is alot of hidden cost that NZ investors do not know about and did not include in the numbers.
No really sure what you are on about Doc. It is w-a-a-a-y cheaper in South America to set up a dairy farm because of the land prices. Perhaps you were confused by the NZS announcement about needing to raise more debt to complete their farm developments? This is nothing to do with poor planning or misreading the cost of dairy farm conversion.
It is because NZS has scaled up their farm management program since the prospectus and capital raising was done. The problem NZS have is that managment have gone in boots and all and are developing a lot more land than they said they would. Thus the original amount of equity, while quite sufficient to carry out their original plans is now insufficient because of the upscaling of the whole company. Time will tell as to whether the upscaling was wise in hindsight or not.
SNOOPY
I think you might find that the recent drought over there increased their costs above their expectation level. New country new problems for inexperienced players in a new country. Pgw should do well out of it flogging it off to the we know best brigade. Dairy has hit rock bottom Fonterra has a mountain of milk powder it is trying to sell. Farmers face a bleak time in the short term which filters down to their suppliers. Macdunk
Jeez Wayne ... PGW now only a $200m market cap company
Priced for eventual demise .......... or cheap as
Let the market talk
I post this chart to illustrate how the crudest, simplest exit system is better than none at all. A 200 day moving is often used by conservative investors to keep them on the right side of major trends. The blue arrows mark entry and exit points as signaled by this indicator. You can see that while it is late to buy and late to sell, at least it protected some of the profits made over the previous 17 months. A 200 day moving average is a fairly blunt instrument, but in comparison with simply "buying and holding" it performs magnificently!
The Trailing Stop featured on the chart is derived from the Average True Range, but those of you without access to this indicator will find that a simple 13% trailing stop gives very much the same plot. A trailing stop is almost invariably quite late to trigger, but, again, infinitely better than no exit strategy at all.
I feel sorry for the poor sods that have been holding PGW all the way down this steep and on-going downtrend but that's what happens when you have no exit strategy and ignore market sentiment. There was plenty of warning and plenty of time to get out of PGW before the plunge.
http://h1.ripway.com/78963/PGW220.gif
You can see where contrarians get their ... courage?
sp 60 c, p/e 2.34, div 26.7%.
Scamper lives in a kennel along with his portfolio, but pgw not among them...
Ive been asking this same ques. The problem is that I dont have the numbers to value the net asset. If one can get a realistic number for a true net asset value, then there could be an entry point. Till then it is all free fall.
Wonder if John Keys will bail this one out? Maybe he can bail our corner dairy out also.
Certainly the candidates for bailouts are increasing... How much is shorting to blame for this? Incredible wealth destruction ...
"As advised in a separate release, the Board has amended its dividend policy
to maximise debt amortisation. To provide certainty to shareholders and to
enable an orderly transition to the new policy, an interim dividend of 5
cents per share will be paid to shareholders registered at the record date of
13 March 2009 issued in the form of taxable bonus shares (fully imputed) on 1
April 2009.
Speaking on behalf of the Board, Sam Maling said "The Directors wanted to
minimise disruption to shareholders whilst moving as quickly as prudent to
the new policy and believe this approach balances these issues. Whilst each
shareholder has different circumstances to manage, RPI in particular is
reliant upon the revenue recognition that a dividend provides. RPI has
options for managing the issue of the form of a dividend i.e. cash versus
shares but does require a dividend to be paid in some form. The Board
believes it is acting in the best interests of PGW by preserving cash whilst
enabling shareholders flexibility in how they manage the implications of the
new policy. The decision to pay the dividend and in the form of bonus shares
was taken without the RPI Board representatives being present."
Where were the RPI Board representatives? Outside the door, holding AK47's and the other directors families until the decision was voted on?
That is pretty outrageous, any illusion that the directors are working for PGW (ie, you, as shareholders) and not RPI (ie, not you) should be shattered by that.
Disc : None, mercifully.
60 cents to 80 cents in 2 days. 33% gain or 6,000% per annum.
Beats leaving money in the bank! So who was brave enough to buy?
Just wrote a spiel on PGW then went to post and was told not logged in.
So to cut a long story short, Norgate said in this mornings brief he announced the SFF 10 mil because when finalising the accounts, that was the amount they decided to allow and having made that decision they were obliged to announce it to the market. He also hinted at the value of posturing in the media.
The good thing about all this is that the SFF and RPI finance issue have driven the shareprice down to an attractive level. The RPI RPS financing is to be announced imminently and Norgate says they wont be selling shares to do it.
SFF will need to ensure they dont push their issue too hard and too far. Its a small country.
The brokers seem to hate PGW. In itself probably a good reason to buy.
Is it because they hate Norgate? I must say his manner isn't endearing, but doesnt the agriculture industry need smart, innovative and passionate investors?
I'm in at 75c
Probably those who had knowledge of the banking renewal before the general publicQuote:
So who was brave enough to buy?
I got a trade in or should i say a punt on 10,000 shares for 60 cents
Seems be rebounding nicely on news of bank finance. Surely Silver fern is still a big grey cloud over them?
Looks to be some good news coming.Quote:
Mediation agreed with Silver Fern Farms
PGG Wrightson and Silver Fern Farms have agreed terms on which a mediation process will
be conducted with a view to settling their dispute over the non-completion of the
partnership arrangement agreed in 2008.
The mediation will be conducted by former High Court judge Robert Fisher QC. Mr Fisher
has been in full-time practice as an arbitrator, mediator and consultant since leaving
the bench in March 2004.
The process will conclude by 18 April 2009, and will seek to achieve a full and final
settlement of the dispute.
The agreement to mediation was welcomed by PGG Wrightson chairman Craig Norgate as a
highly positive step towards settlement. “We are very encouraged by the willingness of
Silver Fern Farms to engage in the most constructive path available at this point. The
involvement of a highly experienced and respected mediator will assist greatly in
identifying the issues between the companies and, hopefully, achieving an agreement.”
The mediation agreement follows a formal admission by PGG Wrightson based on acceptance
that it breached the agreement with Silver Fern Farms by failing to settle the first
instalment of the transaction, that Silver Fern Farms’ subsequent cancellation was valid,
and that the only matter for determination is the amount of compensation to which Silver
Fern Farms is entitled.
No further comment will be made on the dispute, or on the mediation process, at this
point.
http://www.stuff.co.nz/business/anal...tumn-predicted
Got to be good news for PGW as well as the 16% jump in dairy price auction. Cocky's will probally save rather than spend for now but the longer term looks good.
Sellers seem to have dried up completly
Profit upgrades, bank debts sorted out and potential stock overhang out of the way.
Rural Portfolio funding deal good news for PGW
Duncan Bridgeman | Thursday March 19 2009 - 07:42am
Rich lister Baird McConnon will inject new equity into Rural Portfolio Investments – the investment vehicle he owns with PGG Wrightson chairman Craig Norgate – to cover payments to investors.
RPI had been facing a funding crisis as it relied on dividends from its 30% stake in PGG Wrightson to meet interest obligations on its two listed debt issues. RPI has $44.6 million in five-year redeemable preference shares maturing in April.
There were fears that because of PGG Wrightson’s own debt problems and sagging share price, RPI might have been forced to sell its stake to generate cash flow to cover its obligations.
But late yesterday RPI said it has negotiated new commitments – made up of equity and debt funding from Mr McConnon’s family company Aorangi Laboratories, and debt funding from New Zealand financial institutions.
Aorangi is also RPI’s parent company with a 50% shareholding.
The commitments are subject to completion of documentation between all parties. No other details were available last night.
RPI has a total of $102.5 million preference shares on issue.
News that Aorangi and institutions are willing to back the company further is good news for PGG Wrightson shareholders.
The consequences of RPI selling down its stake in PGG Wrightson at this stage of the economic cycle would have been awful. A selldown would have created a big overhang of shares and likely driven the PGW share price lower.
PGG Wrightson shares closed up 3.8% at $1.10 yesterday.
One point of interest is that institutions are willing to back this deal, while resins maker Nuplex struggles to gather support for its $110 million rights issue and share placement.
The market talked and the PGW share price has doubled from the low of 60 odd cents in a little over a month. I do feel sorry for those poor sods who panicked and sold out at the bottom, believing that 'the market must always be right'.
So what about those brave (or reckless?) who bought in at the bottom? I wasn't one of them. In truth this would have been IMO a very large gamble. Dr Who talks about the difficulty of establishing a net asset value, and being scared off buying because of that. Sorry, but with the possibility of a new capital raising and an associated unknown number of new PGW shares sold off at at 50c(?) is on the agenda, I don't believe anyone could have made a meaningful net asset value calculation, even with all of the hard 'facts' at your fingertips.
Similarly Scamper's historical p/e of 2.34, and dividend yield of 26.7% mean little when the number of shares that will be on issue in a years time might be a whole number multiple of the number showing on the share register right now.
Xerof was right. The only sensible buyers were the ones who had knowledge of the banking arrangement renewals before the general public.
So now that the market was 'proved' to be manic depressive by the subsequent PGW share price doubling, is now a good time to invest in PGW? I think there are still unknowns regarding the long term stability of cornerstone PGW shareholder RPI. Yes I read the newspaper quote:
"But late yesterday RPI said it has negotiated new commitments – made up of equity and debt funding from Mr McConnon’s family company Aorangi Laboratories, and debt funding from New Zealand financial institutions."
"Aorangi is also RPI’s parent company with a 50% shareholding."
"The commitments are subject to completion of documentation between all parties. No other details were available last night."
This is the same kind of announcement that came out when PGW announced the Silver Fern Farms merger as a 'done deal', and we all know what happened to that.
You see, we don't yet know the details of this new RPI funding. The above announcement was made from RPI's perspective with an understandably positive spin. If the institutions that are funding this deal had made the press release, who is to say it would not have been worded like this? :
"High flyer Craig Norgate has been exposed just like the Emperor of old and his new suit of clothes. His partners of substance the McConnen brothers have mortgaged all of their assets at our behest to put in capital and provide us with security should RPI fail in the future. Due to the high risk nature of the deal the interest we are charging RPI to allow RPI to just continue to operate is very high. This is a fantastic result for us the faceless institutions."
What do you think would have happened to the PGW share price if that was the press release that had hit the news stands?
SNOOPY
discl: hold PGW
Snoopy, answer me this. How come you listen to the market talking when it goes up - but not when it goes down?
I, too, feel sorry for those that sold at the bottom, but these were most certainly NOT people who believe that "the market is always right". Those that respect and listen to the market would have sold out at around $2.70 when the market began downgrading PGW last September. Even those using the usual "super conservative" 200 day moving average would have been out at around $2.30.
Snoopy, buying well is nowhere near as important as selling well. Big money was made by those selling PGW at $2.70 - and big losses have been made by those that ignored the market and hung on. If nothing else, the sellers now have that much more money with which to buy back in to PGW is they so desire.
http://h1.ripway.com/78963/PGW320.gif
P, I take it that the downtrend is broken and we have a 'Buy' signal?
+15 already today
Perhaps I should have put a winky face on that last post of mine. Better to judge people by what they do rather than what they say Phaedrus. You will note that I said that I *wasn't* buying those PGW shares at the bottom.
To my regret? No. It is always easy to look good 'after the event' when you trade the historical rising trend. But if those third party financiers had not come to the party we could have been looking at another Nuplex here. Next time you went down to the Auckland waterfront, you might have been throwing Craig Norgate a few coins to polish your boots Phaedrus!
The price of PGW shares has been moving about so much you may have to rewrite those moving average rules Phaedrus. When the market price moves around between 60c and nearly five times that amount ($2.90) in just a few months and the share price is now sitting in the middle of that range, you know that something extraordinary is going on.Quote:
I, too, feel sorry for those that sold at the bottom, but these were most certainly NOT people who believe that "the market is always right". Those that respect and listen to the market would have sold out at around $2.70 when the market began downgrading PGW last September. Even those using the usual "super conservative" 200 day moving average would have been out at around $2.30.
That extraordinary thing is not explained by the waxing and waning of dairy prices or the euphoria of the restructuring of the meat industry after all those years which ultimately ended up going down the Silver Fern Farms plughole. No, it was largely to do with the level of company debt and whether the big funders would cut PGW the slack to survive on its existing equity base.
If PGW had announced a 2:1 rights issue at say 40c, what would that have done to the historical charts? Effectively it would have flattened them out meaning that the ups and downs that we had seen were not as extreme. It would also greatly affect the historical 200 day moving average calculation. Since the capital raising didn't happen, all of that is *now* moot speculation. However just last month, a capital raising was a distinct possibility and the market was pricing in that real risk.
Sorry I disagree Phaedrus. I have ignored almost every market sell signal with PGW, and especially all of the recent volatility. As of this morning, I am back in the black on my capital account - so no big losses. Of course I have also harvested many generous dividends along the way. My success has been largely due to selling to Craig Norgate when he first bought into the company (off market) and buying back as the share price fell back in 2004 in the subsequent downtrend. Selling into the off market offer was easy. But my secret was the subsequent buying back in at bargain prices, not the selling.Quote:
Snoopy, buying well is nowhere near as important as selling well. Big money was made by those selling PGW at $2.70 - and big losses have been made by those that ignored the market and hung on. If nothing else, the sellers now have that much more money with which to buy back in to PGW if they so desire.
Of course this was five years ago now, showing that in *this* market as a largely passive investor, you need to be in for the long haul to show positive results.
As for those hypothetical cash holders buying into PGW if they so desire, the liquidity in PGW is not fantastic. The price moved up 15% on less than 20,000 shares this morning. And that was over six transactions averaging just over $3,000 each - all minimum economic parcels. Outside of the top ten, saying you can buy in at the price you want on a particular day and actually doing so is quite another matter.
SNOOPY
Who's buying up $2,760,001 turnover at 10am
To me the more interesting question is why would directors be selling (sold 2.3 mill shares via RPI today)
When I read their recent profit announcement, did I imagine that there was a spiel about the major shareholders being committed to PGW, and not intending to sell in current market ???
BFischer is right I think about RPI needing to realise some cash to pay the interest on maturing debt.
The more fascinating question is who has bought the 2.3 million shares and will the party continue to buy more?
Remember PGW is lining up an underwriter (s) to buy bonus shares in future.
You were dead right Kura. On 26th February we got:
"PGW's major shareholders remain committed to PGW. Rural Portfolio Investments (RPI) has advised that it is well advanced on refinancing its redeemable preference shares that are due in April and Pyne Gould Corporation (PGC) has confirmed that it has no intention to be selling in the current market."
Now on 26th March we get
"15. Number of securities held prior, set out by class and type (as required
by regulation 8) 86,797,343
16. Number of securities subject to acquisition or disposal (as required by
regulation 11(1)(b)) 2,300,000
F. Extent of relevant interest
17. Number of securities held now, set out by class and type (as required by
regulation 6B or regulation 8) 84,497,343 ordinary shares"
What you have missed Kura is that it is now *a whole month later*. Thus we have a 'whole new market'! The situation is exactly akin to if you were an employee of PGG Wrightson. If your boss came out and said he was 100% committed to your continuing employment, that would mean your employment contract was cast in stone for 30 days, absolutely guaranteed. It is agreements such as these which show the firm commitment of management for the corporate security of all stakeholders in this difficult environment, employees and shareholders alike.
SNOOPY
discl: hold PGW
The original preference share issue was $85m, underwritten by ABN AMRO Rothschild. Half of that went into the April 2009 maturing issue. The interest rate was 10.5% paid semi annually. That means an interest payment due of:
[($85m/2) x 0.105]/2= $2.23m
Proceeds from todays share sale (before brokerage) was :
(86,797,343-84,497,343)x $1.20= $2.76m
McConnen and Norgate have done what any responsible adult would do when there are hungry mouths to feed but no food on the table. They have sold some family silver at $1.20 a piece.
And what is more compared to the:
$1.56 x 0.87= $1.35
that RPI paid for the WRI shares in 2004, the share sale has occurred at a minimal discount. No pressure then! But of course RPI didn't sell those 'average' shares. They only sold the bonus shares issued at no cost when Wrightsons and PGG came together to form PGW. So actually RPI have made a good profit on the deal! Right? :-)
SNOOPY
PGW’s Chief Financial Officer to Resign
PGG Wrightson Limited [PGW] announced today that its Chief Financial Officer, Mike Sang, had decided to resign. Mr Sang is planning to take a break from work before pursuing new career opportunities. He has agreed that his resignation will be effective after he has seen the company through the completion of the financial year and its 2010 budgeting process.
PGW has commenced a search for his replacement.
PGW Managing Director, Tim Miles said, “Mike has played a critical role since he joined Wrightson as CFO in December 2003. Since the merger, he has overseen tremendous growth in revenue and profit across the company.”
“Mike has worked very hard to ensure our financial base is sound and he will be leaving PGW in good stead as a result of his endeavours. In particular, he played a key role in the recent successful renegotiation of PGW’s banking facilities in extraordinary times,” said Mr Miles.
“Mike leaves with our best wishes for the future and our thanks for the contribution he made during his time with PGW.”
A CFO leaving a company with financial difficulties. Never seen that before!