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Elders profit surges as farming sector fires

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Strong performances across all sectors has helped South Australian agribusiness Elders deliver a surge in profits for the first half of its financial year of $68.2 million, up 40 per cent on the same period a year ago.

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The publicly-listed company announced its half-year results for the six months to 31 March 2021 to the market this morning.

The company said the statutory net profit after tax (NPAT) of $68.2 million was a result of strong growth across all state geographies and product lines driven by a strong grain harvest and demand for livestock and property.

“Elders’ wholesale business, AIRR, continues to deliver above pre-acquisition expectations, generating $29.3 million ($17.4m pcp) gross margin,” the company’s statement to the ASX said.

“Elders’ Agency, Real Estate and Financial Services businesses also delivered solid growth, supported by strong livestock and property prices and positive farmer sentiment.”

Elders also announced a partially franked (20 per cent) interim dividend of 20 cents per share, up from 9 cents (fully franked) at the previous half year.

The company’s share price was down in early trade following the announcement this morning to $11.91 at 11 am after opening the week at $12.23.

However, it is still well above its $9.42 share price at June 30 last year.

Today’s half-year result follows a full-year profit in the 2019-20 financial year for Elders of $122.9 million in a year impacted by bushfires, drought and COVID-19.

Elders continued to grow its branch footprint and fill geographic gaps in the six-month period, establishing six new greenfield sites and making a further six acquisitions, which are expected to deliver $2.5-$3.5 million in annual earnings.

Chief executive officer and managing director Mark Allison attributed today’s strong financial result to a number of key strategic initiatives.

“Elders’ recent acquisitions, backward integration strategy and customer focus combined with the resilience of our supply chains positioned us well to capitalise on favourable growing conditions and livestock prices,” Allison said.

While the COVID-19 pandemic put some pressure on global fertiliser and chemical supply chains, Elders said it was able to mitigate this potential risk to ensure no material impact on business performance.

It also said it did not access any COVID-related government support such as JobKeeper during the six months to the end of March.

Looking forward, the company said a positive outlook for the winter crop was forecast following ongoing favourable rainfall events.

“Elders expects to see further strong demand for crop inputs, particularly fertiliser and crop protection products, in the second half of the year,” the company said in today’s statement.

“Cattle prices are expected to remain strong, although below the record highs seen recently. Sheep prices are expected to fall in the medium term as the global supply of red meat increases, although increased slaughter numbers should maintain earnings.

“Wool prices will remain volatile until containment or vaccination measures to control COVID-19 are in place allowing supply and demand fundamentals to return.

“Demand for farmland real estate is expected to continue to be fuelled by a favourable commodity price outlook, low interest rates and good seasonal conditions.”

Elders has been an integral part of Australia’s rural landscape since it was formed in Adelaide in 1839.

The company employs more than 2,100 staff across Australia, providing a full range of services to primary producers.

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