PGG Wrightson expects 2023 earnings to fall by about 8.3% as its rural customers grapple with inflationary pressures and dwindling on-farm sentiment.

In a statement to the NZX before its annual meeting in Napier, chair Joo Hai Lee said first-quarter trading was broadly in line with expectations. 

He said the company expected earnings before interest, taxes, depreciation, and amortisation (Ebitda) of $62 million in the year ending June 30, 2023, below last year's $67.2m, due to a “less certain” trading environment.

“On balance, while we remain cautiously optimistic about the financial year ahead there are mixed signals in the macroeconomic environment,” Lee said.

“It is very early in the year however and we will be in a better position to assess after the busy spring trading period.”

Factors such as inflationary pressures were lifting input costs and squeezing on-farm profits and how exporters navigated elevated shipping costs and challenging logistics remained a concern, Lee said.

A cool and wet start to spring as well as late-season frosts in some areas delayed early demand and farmers' concern about proposed agricultural emissions pricing weighed on their sentiment.

“Labour shortages are constraining production, including limiting fruit harvesting and leading to delays in meat processing,” Lee said.

The current rise in food prices was expected to be overall beneficial for NZ’s agricultural sector, although it was also a double-edged sword as the food price hike presented difficulties for many New Zealanders.

“All these factors are contributing to increased levels of uncertainty. Overall, though, we consider that the macroeconomic indicators for the New Zealand agricultural sector remain positive,” Lee said.

The rural services company reported a 20% lift in annual operating earnings in August that beat its thrice-upgraded guidance amongst navigating through a challenging environment.

Ebitda was $67.2m in the 12 months that ended June 30 versus $56m in the prior year. 

The operating Ebitda was above its guidance of $62m-to-$66m, which it raised three times on solid demand across all its lines of business.