PGG Wrightson has posted a net profit after tax and amortisation (NPATA) of $34.6 million for the six months to 31 December 2007, compared with $20.6 million for the December 2006 half year.

The Chairman, Craig Norgate, said the result reflected improved underlying performance in most of the business, offsetting the impact of poor sheep prices, and a strong return from the establishment of NZ Farming Systems Uruguay Limited (NZFSU). “This is an excellent result in challenging operating conditions, with dry weather, exchange rates and poor returns to sheep and beef farmers being of particular concern,” he said.

The interim dividend has been increased from four to five cents per share, fully imputed, and will be paid on 1 April to shareholders registered by 4 March. Under the Distribution Plan introduced in 2007, dividends are paid in the form of bonus shares and shareholders have the right to require the group to buy them back. The first dividend payment under the Distribution Plan, in October 2007, resulted in 44 percent of shareholders retaining their dividends in the form of shares.

Mr Norgate said that, while the operating environment remained uncertain, the group was continuing to perform well. The Board remained comfortable with the earnings guidance provided to the market in December 2007, for full-year NPATA of approximately $60 million, consisting of:
• Earnings from operations $39 million
• NZFSU Performance Fee (based on $1.50 share price) $8 million
• NZFSU share appreciation (based on $1.50 share price) $9 million
• Capital gains/one-offs $5 million

Operating revenue was $609.2 million for the half-year, compared with $523.1 million previously.

Results from operating activities (pre interest, tax and non-operating items) was $48.3 million, double the $23.5 million for the previous December half year. Operating earnings for the December 2006 half-year have been adjusted to exclude gains on farm sales in Uruguay ($2.15 million) as these are included in non-operating income under International Financial Reporting Standards (IFRS). This is the first period for which the group has reported on the basis of IFRS.

Non-operating income totalled $5.4 million, compared with $10.3 million for the previous December half.

Mr Norgate said the initial return from NZFSU reflected the value created by the timely establishment of the company, ahead of a substantial increase in international dairy prices. This had been extended by an accelerated programme of land acquisition and farm development to take advantage of the favourable conditions. “We have been delighted with the results, both for PGG Wrightson and for our fellow shareholders in NZFSU,” he said. The interim results include within operating earnings management fees and a performance fee of $11.9 million, which had an
impact of $8 million on net earnings, and NZFSU share appreciation of $9 million. The performance fee is set by a formula based on NZFSU’s share price growth and distributions, with the applicable share price for the half-year being $1.50.

Operational summary

Rural Services lifted operating earnings (EBITA) from $12.2 million to $14.6 million. Financial Services lifted EBITA from $8.7 million to $23.2 million, assisted by the fee earnings from the NZFSU management contract. EBITA from Technology Services was down from $11 million (excluding the $2.15 million gains on farm sales) to $10.1 million.

The Chief Executive Officer, Barry Brook, said benefits from the dairying boom were helping to offset the impact on the business of the difficulties faced by sheep and beef farmers. “The changes made within our business over the past two years have established a strong foundation, and performance has improved across the group.

“It is particularly pleasing to see the benefits of expansion in PGG Wrightson Finance and Real Estate, and from the establishment of Funds Management. The Rural Supplies business has made a strong comeback and Fruitfed Supplies is performing well. The Seeds and Grain business continues to make a strong contribution, and recent acquisitions have helped position the business as the clear leader in the
Southern Hemisphere.”

Rural Services – The Livestock business was affected by dry conditions, competition for finishing land and low farmer confidence in the sheep and beef sector. Cattle tallies were lower as dairy farmers opted to retain stock, but there were some offsetting benefits from the associated rise in dairy stock values. The Wool business saw a reduction in bales sold as returns were affected by the high New Zealand dollar, but benefited from improvement in logistics costs. The Rural Supplies business benefited from increased sales, driven partly by an internal programme to
increase exposure to dairying, and Fruitfed Supplies consolidated its leadership position in servicing horticultural customers. Higher sales were also achieved by the Irrigation & Pumping business.

Financial Services – Underlying growth (excluding the NZFSU performance fee and the prior period effect of a $600,000 reduction in provisions) was 40 percent. Key factors were the achievement of new revenues in Funds Management and growth in the Real Estate business, which increased operating contribution by 68 percent. Real Estate benefited from expansion initiatives, new business development and a strong
rural real estate market, and achieved increased market share in most areas and sectors. The Finance business expanded its loan book by 14 percent from 30 June to 31 December and lifted its contribution by 4 percent. Importantly, given turbulent conditions in the finance company sector, it strengthened its funding base through deposit growth, a high level of reinvestment and increased bank lines.

Technology Services – New Zealand domestic and export sales of proprietary seeds increased, offsetting the impact of the Australian drought on sales in that country. The South American Seeds business continued to expand, through market expansion and the recently-acquired  usinesses in Uruguay and Argentina. Agri-feeds achieved higher sales to the buoyant dairy market, while the Agriculture New Zealand training
business had reduced sales as it adapted to regulatory changes affecting its clients.

Highlights

o Strong commitment from staff in all business areas to take the necessary measures to improve performance
o The appointment of Tim Miles, one of New Zealand's most successful chief executives, to succeed Barry Brook as Chief Executive Officer
o The retention of Barry Brook to lead the further development of the group’s businesses in the key South America market
o Strengthened client focus through the appointment of seven new District Managers to enhance local leadership

Rural Services

o Further development of the Livestock business’s position in the dairy sector
o Launch of a bale dumping project and a Dunedin property and store rationalisation in the Wool business
o A new operating structure and increased dairy focus in Rural Supplies, and new technology trials in the Fruitfed Supplies business

Financial Services

o New Low Documentation and Livestock Leasing products in Finance
o A new deposit campaign, maintaining high reinvestment rates in a very difficult environment for finance company operations
o In Real Estate, the launch of three offices in Australia, continued expansion in the residential and lifestyle sectors, the acquisition of Hawkes Bay Realty and the formation of new international marketing links
o The further capital raising of $112 million for, and successful listing of, NZFSU Technology Services
o The acquisition and integration of the AgarCross seeds business in Uruguay and the AusWest business in Australia
o New warehouse facilities to support growth in the Australian Seeds business
o Establishment of a joint venture between the Seeds business and Crop & Food Research to develop improved forage brassica cultivars, primarily for the benefit of New Zealand farmers
o Acquisition of the 4 Seeds Molasses business, along with the sale of terminals and restructuring of logistics
o Development of relationships with regional polytechs and the achievement of New Zealand Qualifications Authority certification by Agriculture New Zealand

Outlook

Mr Norgate said the businesses within the group were continuing to execute well. There was a strong focus on continued cost control and on driving benefits from the recent investment in areas outlined above. “While the nature of the business means it will always be sensitive to external conditions, including seasonal weather patterns and market factors, the changes made within the group have increased our ability to
achieve positive business outcomes.

“Operating conditions are always unpredictable, but present indications are that the underlying strength in dairy will offset the pressure on the sheep and beef sector. The dry weather in some areas (eg. Canterbury) is behind us, but feed shortages continue in a number of North Island areas. These conditions will continue to affect our Livestock business, but offer opportunities for our Seeds business when the rains arrive. On a positive note, the impact of reduced milk production in New Zealand is likely to affect the balance of global markets and thus help maintain high prices over the next year or more.

“In Australia, the recent rains have been very welcome. In South America, the continuing growth of the markets and the additional stimulus from the growth of NZFSU provide a strongly positive outlook.

“We are confident that the group is positioned to perform well in its various markets and operating environments. The fundamentals for medium and long-term growth in agriculture – and thus for PGG Wrightson – remain strong.”

Ends

For further information:

Barry Akers
(09) 309 5656
(021) 571 234

Mike Sang
Chief Financial Officer
PGG Wrightson Limited
(03) 372 0979
(0275) 918 740