Elders share price slumps amid harvest washout forecast

Elders share price slumps amid harvest washout forecast

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Shares in Elders dropped 22 per cent by early afternoon ASX trading despite the agribusiness announcing a 42 per cent jump in profits before tax.

Key points:

  • Elders agribusiness announced a statutory profit for FY22 was $162.9 million, up 9 per cent on FY21
  • The company will pay a final dividend of 28 cents per share, up from 22 cents in 2021
  • Elders invested $25m in automated wool handling

Fears of a flooded winter crop harvest and the announcement Elders’ managing director and chief executive for the past decade, Mark Allison, will retire next year are believed to have contributed to those results.

In today’s announcement to the stock exchange, Elders reported an underlying profit of $223.5 million before tax, up by 42 per cent on last year.

The statutory profit was $162.9 million, up 9 per cent.

The operating cash flow was down 20 per cent on last year to $113.7 million but the company still declared a final dividend of 28 cents per share, up from 22 cents a year ago.

Revenue also grew 35 per cent to $3.45 billion after a strong year for farm commodities.

an graphiic showing nine finamcial areas in numerals and in graphics

Elders delivered $232.1 million in earnings before tax and interest.(Supplied)

Mr Allison said demand for rural products remained strong with high demand for agricultural chemicals, fertiliser and seed.

The rural products business experienced strong results with a gross margin of $383.1 million, up 35 per cent on last year, but Mr Allison said it was starting to push farmers’ ability to pay.

“Our margin particularly for some of the crop protection products has reduced because it’s a competitive market,” he said.

The real estate services gross margin of $61.6 million was up 21 per cent on last year.

It reflected high demand for farm assets although rising interest rates resulted in that figure decreasing in the fourth quarter.

“Interest rates have impacted regional and rural real estate at the same time a quarter of our real estate business is property management and so that has improved significantly as people are renting more,” Mr Allison said.

Investment in wool handling

Elders made a $25 million investment in an automated wool handling business.

The technology is intended to enable autonomous guided vehicles to move wool to be moved around the business’s Melbourne warehouse.

“Our thinking is that wool is our core business, these are our core clients and we believe we can add significant efficiency to the supply chain with that investment,” Mr Allison said.

View from a helicopter showing flooding across paddocks devastating crops.

Flooding in productive grain belts, like Forbes, has created uncertainty about production outlook.

Stepping down

Mr Allison said he would leave his role by November next year — 10 years after he took over the job.

The company was still struggling with the effects of the Global Financial Crisis, that almost brought the 183-year-old company to its knees, when Mr Allison was appointed chairman.

“When I became chairman we were still in bad bank and I think market capitalisation was around $50 million,” he said.

The company developed an eight-point, three-year strategic plan to turn things around and Mr Allison was pleased with the way it had worked.

“We went back to being a core, pure-play agribusiness and … today we’re sitting at about $2 billion market capitalisation,” Mr Allison said.

“When I look at the things I’m most proud of it’s seeing Elders people being able to contribute back into regional and rural Australia, supporting local communities, investing in ag tech to help agriculture,” he said.

A dirty hand holds three hail stones the size of a bean.

Large hail stones have damaged crops ready for harvest on the Eyre Peninsula. (Supplied)

Mr Allison said the business was well placed despite there being concerns about the effect the wet summer, commodity prices and the possibility of a downturn in the global economy.

“It’s a completely different business to the Elders that got caught in the GFC … one of the hallmarks of the last nine years with the eight-point plans has been financial discipline, not over extending, so there is a high degree of discipline that we have introduced,” Mr Allison said.

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