Elders has reported $82.8 million in underlying earnings before interest and tax (EBIT) for the six months to 31 March 2023. Full year underlying EBIT guidance remains on track between $180 million and $200 million.
The company reported statutory net profit after tax (NPAT) of $48.8 million – down 46.5% on the prior corresponding period (PCP). Underlying EBIT of $82.8 million was down 37.7% on the PCP, but up 12.2% on HY21.
Elders ASX announcement described the result as a “resilient HY23 performance against a volatile agricultural industry backdrop, impacted by softened livestock trading conditions, weaker crop input prices and unseasonably wet weather.”
This contrasts with the exceptionally favourable HY22 trading conditions which saw firmer livestock prices, a strong real estate market and ahead-of-season client procurement for winter cropping, in response to the global supply chain uncertainty at that time.
HY23 continued the similar trajectory seen in the fourth quarter of 2022 with the industry reverting to a more ‘normalised’ trading environment. The directors have determined to pay a dividend of 23 cents per share, 30% franked.
Managing dDirector and CEO, Mark Allison said, “the half year financial results have been satisfactory given the market and seasonal conditions, especially in the flood-impacted Q1. Elders continues to execute its plan to deliver growth through the cycles.
“FY22 was unusual with EBIT greater in the first half than the second, primarily because clients brought forward their winter crop procurement due to supply concerns and rising input prices.
“The freeing up of supply chains, lower freight costs and more sustainable fertiliser prices are a great benefit to the agricultural industry but make comparison between HY23 and HY22 challenging.
“Consequently, Elders has taken the decision to provide full year guidance to reinforce our expectation that second half earnings are likely to exceed the first half, a more typical earnings profile for Elders. We look forward to the second half given the strong winter crop outlook.”
Mr Allison attributed higher operating costs to the significant strategic investments in business transformation and growth initiatives.
“To deliver on growth beyond the third Eight Point Plan, Elders must invest in strong leadership and capable people to deliver initiatives like our Systems Modernisation program, Rural Products supply chain optimisation and Elders Wool Handling.
“These investments are critical to remaining a leading and trusted partner to farming clients into the future.
“The first stage (Wave 1) of our Systems Modernisation program is on track for successful completion within budget and on time,” Mr Allison said.
“Elders has also made a series of strategically important acquisitions in the first half of the financial year and opened new branches to increase points of presence. The pipeline of quality bolt-on acquisitions remains strong.
“Elders continues to invest in an expanded product portfolio through the TitanAG brand, as well as growing its service offerings and branch network to better cater to the changing needs of Australian farming clients and emerging markets.
“We remain confident in the strategic foundations and principles set for Elders under its Eight Point Plan and its ability to deliver expected earnings and shareholder value at full year.”
In separate news, on 24 May Macquarie Group became a substantial shareholder of the Elders with a purchase of almost 10 million shares giving it 6.38% voting power.
