PGW, SEK, SCL: Stocks in news amid talks of pricing agri emissions

Highlights

Agriculture accounts for 50% of the gross emissions of NZ, as per a report.

PGW raised its FY22 operating EBITDA guidance to near $62 million considering growth in its business and earnings.

SEK strengthened its retail services business despite lockdowns and grew its kiwifruit business by 33%.

NZ’s gross emissions have risen by 21% since 1990, as per a Greenhouse Gas Inventory report released by the Ministry of Environment this month. However, countries like the US, France, Germany, the UK and many others have witnessed a drop in their emissions.

Agriculture accounts for 50% of the gross emissions, the largest contributor to emissions with dairy being the most polluting industry, as per the report. The NZ government decided to put agriculture emissions under the tax net in 2019 but the Climate Change Committee asked the government to work in association via a plan called He Waka Eke Noa.

The agriculture industry needs to come up with a solution by 2025 otherwise, the sector’s emissions will be taxed under ETS, though with a 95% discount.

On this note, let’s see how these 3 agri stocks are doing.

PGG Wrightson Limited (NZX:PGW)

An NZ-based agricultural producer and supplier, PGG Wrightson, registered a remarkable 11% rise in revenue and a 32% rise in NPAT on pcp to $552.4 million and $22.5 million, respectively, in H1 FY22.

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The Group paid an interim dividend of 14cps on 1 April 2022. PGW’s diversified business continues to adapt to clients and market needs amid a highly volatile environment.

PGW raised its FY22 operating EBITDA guidance to near $62 million considering growth in its business and earnings as well as a positive outlook for the agriculture and horticulture sectors.

Scales Corporation Limited (NZX:SCL)

Scales, a diversified agri-business firm offering services to the export sector of NZ, saw a strong performance in the first half of FY22. In FY21, revenue and EBITDA were NZ$514.6 million and NZ$73.8 million, up by 9% and 15%, respectively.

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DCL's broad agricultural strategy, which was aided by good results from the Food Ingredients sector, enabled the company to achieve record earnings.

For FY22, SCL anticipates underlying net profit to range from $30.5 million to $35.5 million.

Seeka Limited (NZX:SEK)

Fruit producer and distributor Seeka provided ASM presentation for April 2022 on Friday. Seeka generated a record EBITDA and revenue of $56.8 million and $310 million, respectively, for the year ended 31 December 2021, up by 32% and 23% on pcp, respectively.

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SEK strengthened its retail services business despite lockdowns, grew the Australian business, grew its kiwifruit business by 33% and invested in agritech as well as automation. The Group continues to progress on its strategy to be a more sustainable business.

Bottom Line

NZ needs to invest in R&D to come up with solutions to lower agricultural emissions and thus, benefit the overall environment.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)