Shares of Elders fell 22 percent through early afternoon ASX trading, despite the agribusiness announcing a 42 percent jump in pre-tax earnings.
Core items:
- Elders Agribusiness announced that FY22 statutory profit was $162.9 million, up 9 percent from FY21
- The company will pay a final dividend of 28 cents per share, up from 22 cents in 2021
- Elders invested $25 million in automated wool handling
Fears of a flooded winter harvest and the announcement that Mark Allison, Elders’ managing director and chief executive for the past decade, will retire next year are believed to have contributed to these results.
In today’s stock release, Elders reported underlying pre-tax earnings of $223.5 million, a 42 percent increase over the prior year.
Legal earnings were $162.9 million, up 9 percent.
Operating cash flow fell 20 percent year over year to $113.7 million, but the company still announced a final dividend of 28 cents per share, up from 22 cents a year ago.
Revenue also rose 35 percent to $3.45 billion after a strong year for soft commodities.
Mr Allison said demand for rural products remains strong, with high demand for agricultural chemicals, fertilizers and seeds.
The rural products business reported strong results with a gross margin of $383.1 million, up 35 percent from a year earlier, but Mr Allison said it was starting to squeeze farmers’ ability to pay.
“Our profit margin has narrowed, particularly for some crop protection products because it’s a competitive market,” he said.
Real estate services gross margin of $61.6 million was 21 percent higher year-over-year.
This reflected strong demand for agricultural assets, although rising interest rates caused that number to decline in the fourth quarter.
“Interest rates have impacted regional and rural real estate, while a quarter of our real estate business is property management, and that’s improved significantly as people rent more,” Mr Allison said.
Investment in wool handling
Elders invested $25 million in an automated wool processing business.
The technology will allow autonomously guided vehicles to transport wool at the company’s Melbourne warehouse.
“We think wool is our core business, these are our main customers and we believe that with this investment we can make the supply chain significantly more efficient,” said Mr Allison.
dismount
Mr Allison said he would leave his position by November next year – 10 years after he took the job.
The company was still grappling with the effects of the global financial crisis, which nearly brought the 183-year-old company to its knees when Mr. Allison was appointed chairman.
“When I became chairman, we were still in the bad bank and I think the market cap was about $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’ve gone back to being a pure-play agribusiness and… today we have a market cap of about $2 billion,” Mr. Allison said.
“When I look at the things I am most proud of it is that Elders are able to contribute back to regional and rural Australia, support local communities and invest in agricultural technology to help the to help agriculture,” he said.
Mr Allison said the company is well positioned despite concerns about the impact of the wet summer, commodity prices and the possibility of a downturn in the global economy.
“It’s a completely different business than the elders who got into the GFC … one of the hallmarks of the last nine years with the eight-point plans has been financial discipline, not overstretching, so there’s a high level of discipline that we’ve introduced,” said Mr. Allison.
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