Wynnstay warns on profits as farmers eye Brexit, weather

The AIM-listed outfit said second-quarter market conditions were significantly weaker due to abnormally warm weather, which has reduced its customers' requirement for feed and other weather-related products.

Recent weakening in farm gate prices, believed partly to be the result of Brexit uncertainties, is also undermining farmer confidence, while Brexit has also resulted in higher costs for certain imported raw materials.

"Results for the first six months of the financial year are therefore expected to be substantially behind those of last year," Wynnstay's board said. "Given these prevailing uncertainties, management currently believes it prudent to anticipate that the full year outturn is likely to be substantially below current market expectations."

However, demand for arable products gained momentum over recent weeks, while margins for spring cereal seed are expected to be higher than last year although volumes will be lower because of the increased acreage sown to winter cereals.

The Glasson raw materials business "continues to perform well" and the integration of the Countrywide farmers' stores, acquired in April 2018, is progressing "as planned".

Despite current trading conditions, the board felt the group "remains well placed to capitalise on opportunities in the agricultural sector and that prospects over the longer term are positive as agriculture adjusts to the changing economic landscape".

Analysts at Shore Capital Markets downgraded their forecasts for the 2019 financial year, cutting profit before tax from £9.6m to £7.7m, and the 2020 financial year, reducing profit before tax to £9.3m from £9.8m.

"Whilst downgrades are disappointing, we highlight the fact that management remains very cautious looking ahead on the trading environment. We remain positive on the group’s long-term prospects, which are supported by a resilient business model and strong balance sheet but note the near-term trading environment looks to be deteriorating," said the analysts.

Wynnstay Group's shares were down 22.44% at 327.70p at 0905 GMT.