Market headwinds and inflation sow soft Elders earnings
The Adelaide-based agribusiness saw profits fall, with “significantly declining livestock prices” and inflationary pressures contributing to the depressed figures.
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Elders said the coming financial year would also be weaker thanks to dry El Niño conditions following the 12 months to 30 September 2023, when earnings fell 26 per cent to $170.8 million.
Profit after tax was also down by 38 per cent to $100.8 million, with the company blaming “adverse market headwinds” for the softer results.
Operating cash flow was the only key financial metric to rise, with the company improving on that measure by $55.5 million.
However, the $170.8 million in earnings was still the second highest in the last 10 years for Elders – one of Adelaide’s Top 100 companies for 2023 according to the South Australian Business Index.
The headwinds included softening prices for key agricultural chemicals and fertilisers and significantly declining livestock prices. Inflationary pressures and rising interest rates also had an impact.
Elders managing director and CEO Mark Allison said he expected the negative trends of FY23 to continue into the new financial year.
“We expect some of the market headwinds experienced in FY23 to continue into FY24, but we are well placed to pursue opportunities for further growth and diversification,” he said.
Elders added that margins decreased for its agency services and real estate services arms, with the former’s decline driven by lower sheep and cattle prices, while rising interest rates impacted the latter.
Financial services earnings improved due to a stronger performance from the Elders Insurance business and livestock lending.
Allison said Elders’ financial performance in FY23 was resilient.
“The year was met with challenging market and cost conditions and despite this, Elders achieved its second highest EBIT result in the last 10 years,” he said.
“This resilience was achieved due to our geographically diversified multi-product portfolio, which generated strong average earnings across the group.”
Elders said the next financial year would bring the “potential for declines in summer crop production outside of irrigated areas, as a result of dry and El Niño conditions”.
“However, some margin recovery in Rural Products can be expected as input prices, particularly fertiliser and crop protection, have returned to more sustainable levels.”
Shares in Elders are up 10.19 per cent to $6.81 per share at 11.15am on 13 November 2023.
