Elders Returns To Dividends
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Unlike the latest result on Friday from GrainCorp and a big drop in earnings, there was no sign of the impact from growing dry across much of the eastern states in the half-year results from Elders yesterday.
But the impact is coming as the company warned yesterday that weakening cattle prices will impact the current second half performance, along with reduced winter cropping because of the dry weather.
Investors ignored those warnings and pushed the shares up more than 3.7% to $8.40.
The company revealed a small rise in interim earnings, but more importantly for shareholders, it will pay a 9 cents a share dividend, compared to no payout for the first half of the previous year.
Elders lifted its half-year net profit 8% to $41.4 million, helped by higher fertiliser and crop protection product sales.
Elders said revenues rose 2% to $749.7 million in the six months to March 31 and CEO Mark Allison said an easing in cattle prices in the second half due to higher international competition would affect earnings in the group's Agency division, with expansion offsetting that fall.
Low rainfall across most of the country in April and May will also affect winter cropping conditions and is expected to result in lower demand for fertilisers and chemicals.
“Continued strength in the retail business was driven by a combination of organic growth across southern Australia and the acquisition of Ace Ohlsson — a horticulture supplies business based in New South Wales, which has resulted in a $9.4 million improvement in margin,” Elders chief executive Mark Allison said.
“Strong wool performance and additional sheep earnings from agency acquisitions, offset by declining cattle prices and volumes resulted in a $0.7 million uplift in agency margins.”
Elders bought Kerr and Co Livestock in December last year, the largest privately owned independent livestock business in south west Victoria.
Mr Alison said retail earnings would increase in the second half of 2017-18 with contributions from the recently acquired Titan Ag chemicals business.
Based on the historical performance of Titan, Elders said yesterday it expects Titan to generate annualised additional earnings before interest and tax (EBIT) between $6.5 million and $7.5 million in its first full year of Elders’ ownership (the year ending 30 September 2019).
Last month, Elders announced it had entered into a conditional sale contract to divest its feedlot and processing assets from its Indonesian subsidiary, PT Elders Indonesia.
Mr Allison said high cattle costs and changing Indonesian governmental policies had adversely affected its Indonesian business’s performance.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.