Elders share price plummets on crop washout forecast

Elders share price plummets on crop washout forecast

Shares of Elders fell 22 percent through early afternoon ASX trading, despite the agribusiness announcing a 42 percent jump in pre-tax earnings.

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.

Elders posted earnings before interest and taxes of $232.1 million.(delivered)

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.

View from a helicopter of flooding over paddocks devastating crops.
Floods in productive grain belts like Forbes have created uncertainty about production prospects.


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