Shares in Elders Climb Despite the Drought

Edward Boyd, The Daily Telegraph

Strong wool prices, increased retail revenue and horticulture acquisitions have helped agribusiness group Elders boost its full-year underlying profit by almost 10 per cent.
The solid result was welcomed by shareholders who sent the ASX-listed company’s share price up 19.7 per cent yesterday to $8.87. Elders said underlying profit for the year to September 30 jumped 99.1 per cent to $63.7 million, but statutory net profit slipped 38 per cent to $71.6 million.

Revenue increased 2 per cent to $1.61 billion while average net debt rose by $24 million to $161 million at the end of September. Chief executive Mark Allison said cattle prices fell during the year, and the particularly dry conditions on the east coast meant that inventory levels in Elders’ retail outlets decreased in certain regions. He said the drought had been hard for farmers and business but Elders had managed to weather the storm due to its diverse revenue streams.

“At a local level, it is certainly very tough for many parts of the country,” Mr Allison said

“From a business viewpoint, the level of diversification … from a product and geography perspective means the overal impact has been limited.”

Due to the dry conditions Elders expects farmers to plant fewer crops between now and the end of March, resulting in lower demand for fertiliser and crop protection products.
The recent acquisition of chemical supplier TitanAg is expected to deliver $7 million in earnings int eh coming year, and wool prices are anticipated to continue growing due to a decline in production and increased global demand. Cattle prices are also expected to ease further as production increases, but lamb prices are set to rise on strong export demand. The company will pay a fully franked final dividend of 9c per share, up from 76.5c a year ago.
Mr Allison said the company’s return on capital continues to be above the 20 per cent target, and was 24.2 per cent for the year.