Land company investors see shares outperform NZSE40

Friday 30th November 2001

The results justify the market's re-ratings of the stocks, writes PETER V O'BRIEN

Shareholders in land-based companies had a great year, assuming they had holdings for eight months or more. Percentage changes to share prices from March 2 - the cutoff date for the last examination of the sector in The National Business Review - are in the table.

All companies substantially outperformed the NZSE40 capital index. Some were close to the best gains for the year among all stocks.

That could be seen when prices last week were compared with those at the week ended November 24, 2000.

The percentage changes over that period were: Cedenco (+69.9), Dairy Brands (+57.1), Pyne Gould Guinness Reid¹Farmers (+39.3), Williams & Kettle (+44.5) and Wrightson (+109.1).

Pyne Gould Guinness Reid Farmers was the result of a merger of Otago-based rural services company Reid Farmers with the trading subsidiary of its major shareholder, Pyne Gould Corporation.

Notice of talks between the two groups was given on June 13 and the closing price on June 12 for the then Reid Farmers was $1.10.

The increase between November 24 last year and June 12 was 23.6%.

The comment on the sector in NBR, March 9, that future price growth depended on commensurate earnings gains in any given period was a truism, but the latest profit results vindicated price rises over the past nine months.

Former corporate dairy farmer Dairy Brands underwent many changes in the past 12 months.

The company sold all its farms, had a share buyback of two shares for every three held (effectively a cash distribution to shareholders) at 70c a share and now has cash resources.

Dairy Brands' movement out of corporate farming was in line with a similar decision of Tasman Agriculture which is no longer traded on the Stock Exchange.

The latter company went into voluntary liquidation after selling all its New Zealand dairy farms.

A company can no longer be listed after appointment of a liquidator, whether on a voluntary or involuntary basis.

Tasman Agriculture shareholders were paid $1.20 in cash this month and issued with one share in Leander Holdings for every share held in Tasman.

Leander is the New Zealand-based company which owns and operates Tasman Agriculture's Australian interests.

Tasman Agriculture's shares were last traded on October 31 at $1.75, compared with $1.50 on March 2 and $1.29 last November.

Shareholders received a taxable special dividend of 43c a share and the proceeds of a share buyback of two shares for every five held at $1.47 a share, both transactions being finalised on June 14.

The pre-merger Reid Farmers said in August net profit for the year ended June 30 was $7.58 million, a 64.8% increase on the $4.6 million earned in the previous year.

The company referred to "buoyant returns" for pastoral farmers as leading to the record results.

It also said it had the "correct strategies for a rural servicing business" and considered they were being properly implemented.

Reid Farmers had five operating divisions: rural real estate, farm supplies, financial services, livestock and wool. Each returned record results.

The company under its previous and now merged titles had and has the structure of a classic stock and station company, a term considered dated.

It has been a succinct description of how the organisations arose and of their functions in the 21st century.

Williams & Kettle and Wrightson had a similar background but diversified more than Pyne Gould Guinness.

Both companies were optimistic about the future when reporting solid results for the year ended June 30.

Williams & Kettle said strong trading conditions experienced in the past year were continuing into the current term when it issued a preliminary report on September 24.

There was a caveat in relation to the September 11 events in the US. The company said they added considerable uncertainty to the global outlook.

Williams & Kettle's profit went from $4.18 million in 2000 to $7.05 million, a 68.7 increase.

Wrightson reported in August, before the September 11 political, economic and financial earthquake. Group profit was up 41% at $20.7 million. The company expressed confidence in the future.

These results justified the market's ongoing re-rating of the companies' share prices.

Land-based companies' share prices (c)

Company	Price 24.11.01	Price 2.3.01	2001 high	2001 low	% change 2.3.01 to 23.11.01

Cedenco	225	152	229	131	+48.0
Dairy Brands	66	50	73	41	+32.0
Pyne Gould Guinness¹	124	100	135	80	+24.0
Williams & Kettle	383	308	400	275	+24.8
Wrightson	115	70	123	57	+64.8
NZSE 40 capital index (rounded)	2003	2000	2120	1789	+0.15

¹ Renamed Pyne Gould Guinness on November 26

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