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Drought hits Elders' earnings


Elders’ net profit has slipped 3.7 per cent to $68.9 million, but its suite of new purchases has helped offset drought-ravaged cropping and wool volumes.

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The Adelaide-based company’s underlying profit for the 12 months to September was $63.8 million – within guidance but flat on last year – propped up by earnings from new acquisitions Titan pesticides and Livestock in Transit insurance.

Shares in the company climbed by as much as 8.1 per cent to $6.55 in early trade on Monday, their highest mark since mid-September.

Total revenue climbed 4.0 per cent to $1.67 billion, but Elders’ rural products, agency and financial services divisions copped an earnings decline, and Western Australia was the only geographic region to post a positive earnings contribution.

Earnings across Elders’ northern Australian operations slipped $9.1 million and southern Australia by $7.2 million as farmers continue to feel the heat of a severe drought.

Nonetheless, the company maintained its final dividend at 9.0 cents, fully franked.

Elders’ chief executive and managing director Mark Allison said on Monday it had been a sound performance during tough conditions

He said the upcoming summer cropping season would again prove difficult, but average winter crop seasonal conditions and the pending acquisition of Australian Independent Rural Retailers would help shore-up growth prospects into FY20.

“The opportunities presented by our investment in AIRR, together with the ongoing consolidation occurring in the rural services industry, position Elders well to grow earnings in FY20 and beyond,” Allison said.

Elders’ underlying return on capital slipped from 24.2 per cent to 18.2 per cent, below the company’s 20 per cent target, mainly due to lower earnings on reduced wool volumes and a poor summer cropping season, and an increase in rural products and livestock capital balances.


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