AUCKLAND, NEW ZEALAND--(Marketwired - Oct 27, 2016) - Agria Corporation (
27 October 2016
Dear Shareholders of Agria Corporation:
We are writing to report on the initial success of your Company's share repurchase program. As you may recall, on June 8, 2016 the Board authorized the repurchase of up to $10 million worth of our American Depositary Shares ("ADS" or "shares"), which trade on the New York Stock Exchange. The repurchase program was motivated by the Board's assessment that the ADSs were significantly undervalued relative to the assets of the firm. In particular, the trading price of an ADS is still today far below the our calculation of net asset value of the company, which reflects our economic interest in PGG Wrightson less debt and other liabilities.
Based on the most recently quoted price of PGG Wrightson and the current NZD/USD exchange rate, we calculate our net asset value at over $1.35 per ADS, significantly above the most recently quoted trading price of $0.85 per ADS.
We are taking action to address this valuation discount.
On October 6, 2016, we announced that we had adopted a 10b5-1 trading program, which enables us to buy shares in the open market on a regular and predefined basis, thus avoiding any issues relating to material non-public information. At the time of the announcement, the Board had approved the program, the trading account was opened with a major US-based brokerage firm, and purchases had commenced. We have been active buyers in the open market on every day since announcing the program. Our volume has varied between 1/8 up to 1/3 of daily volume, depending on the day. We are also authorized to make larger block purchases once a week, at our discretion.
Agria has a number of attractive options for deploying capital, due to the many growth opportunities at our main subsidiary PGG Wrightson. Most of our earnings will be redeployed to drive growth at PGW. Nonetheless, as long as our ADS remain significantly undervalued relative to our net asset value, we consider share repurchases to be a good use of capital, and the repurchase program will continue until the authorization limit is reached. At that point, should the ADS remain undervalued, we anticipate that the Board would extend the authorization amount and term.
The idea of buying a dollar for 50 cents has intrinsic appeal to us, and is a value-generating transaction. Like you, we admit to being somewhat mystified by the discount at which our ADSs trade. We can certainly appreciate this quote from Warren Buffett:
"It is extraordinary to me that the idea of buying dollar bills for 40 cents takes immediately with people or it doesn't take at all. It's like an inoculation. If it doesn't grab a person right away, I find you can talk to him for years and show him records, and it doesn't make any difference."
In addition to the share repurchase, we are taking other actions to improve our investor outreach in order to create greater awareness of Agria in the US markets. However, our top priority remains to build a truly great global agriculture company. As long as we succeed in building the business, our share price will ultimately reflect the business value we create.
Last week, our subsidiary PGG Wrightson announced its fiscal year 2017 guidance, which was for net income to be roughly flat with fiscal 2016, and operating EBITDA in the range of NZ$62 to NZ$68 million. On the surface this may not sound exciting, but this is actually a very important moment for us. Trading conditions in the agriculture industry are difficult at the moment, and are anticipated to be even tougher in the next twelve months. In years past, a tougher environment equated to declining results, and even losses. In the past three years, we have restructured PGW to be a resilient, robust, and flexible company. Since we cannot control the external environment, our goal in restructuring PGW was this: remain profitable in poor conditions; expand the business and grow earnings in good conditions. We now believe we can meet our objective of being profitable in the face of headwinds, and thriving when tailwinds prevail. This alone substantially increases the long-term value of your company.
We appreciate your interest and support as we work to grow your company. The prospects for Agria and PGG Wrightson are bright, and immense effort is being directed at pursuing exciting new opportunities across the Southern Hemisphere. We are intensely focused on ensuring that the value of your shares fully reflects the business success we expect to achieve.
If you have any questions or comments please feel free to email or call us.
Chief Financial Officer
PGW's guidance announcement and management comments can be accessed via the following link: http://pggwrightson.co.nz/our-company/nzx-announcements
All references to PGW refer to PGW, its subsidiaries and its interests in associates and jointly controlled entities.
About Agria Corporation
Safe Harbor Statement:
This announcement contains forward-looking statements. These statements, including the management's commentary, are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Agria may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Agria's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in Agria's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this announcement unless otherwise stated and Agria does not undertake any obligation to update any forward-looking statement, except as required under applicable law.