Well, the ‘good news’ is that Elders (ELD) ‘only’ lost a total of $505 million in the year to September, instead of last week’s estimate of $510 million.
And, to give that some context, the loss is almost as much as the trio of bidders are willing to pay for Warrnambool Cheese and Butter (WCB) – which tells us something about the sort of demand there is for attractive, profitable companies in key agribusiness sectors and the reality that Elders now finds itself in.
As the Elders auditors warned yesterday there is a "material uncertainty" whether the group will survive as a going concern. That’s a big difference to what we are seeing at Warrnambool.
So can anyone imagine a bid for Elders in its current state – even with the promise of its rural services business (which has been cut back to help lower costs instead of being invested in to grow the business)?
Elders yesterday tried to spin its results by glossing over the losses and telling the world that it was announcing a return "to pure agribusiness".
"Elders managing director, Malcolm Jackman, said the 2013 year marks the near completion of a five year process of rationalisation and restructuring in order to refocus Elders on its core strength and historical purpose – rural services," the statement read.
“Without trying to diminish the impact on statutory profit or overlook the costs to many of the stakeholders involved, we are relieved to have finally reached this long sought after objective. Elders can finally focus all of its management and staff attention on operating our core business and serving our rural and regional customers.”
But looking at the company’s history tells a different story.
In the last five years Elders has lost $1.59 billion, which has left the company with shareholder equity of just $46.2 million, little changed from its sharemarket worth of $50.1 million at the end of September, when it ruled off its books. At the same time, the gearing ratio stood at 552%, on debts of $295.1 million.The company’s position and valuation are roughly the same at the moment.
It sounds an impossible situation, but the company can trade its way back to a stronger position if its financiers allow it to.
And then there’s the latest problems in its cattle business with the defection of staff and claims of losses and legal action which may see further financial losses emerge.
Elders management said the probe of these claims is expanding and it will be three weeks or so before a report from the investigation appears. But it seems to be serious. So does this mean more losses on top of the $24 million booked in the year?
No wonder Elders shares were steady on 12c for most of trading yesterday before a slight half cent fall took them to a 11.5c close. But the shares are still up sharply from the profit update a week ago. A lot of investors – mostly day traders – bought into that and should have exited with fat and quick profits.
ELD YTD – Elders loss confirmed, but future still very uncertain
But those looking for a longer term recovery must be wondering, yet again, what is it about Elders that a lot of good ideas and strategies end up ruined?
Elders’ loss for the year ended September 30 was $505.2 million, compared to a loss of $60.6 million in 2011-12.
The latest loss included $442.2 million in impairment charges and other non-recurring items related to divestments and restructuring as Elders moved towards becoming its agribusiness future.
Elders sold its Futuris automotive interiors business earlier in the year and has nearly finished quitting its forestry assets.
Mr Jackman said that as a result of the sales the company had substantially reduced its debt.
Elders said a downturn in sales in the rural services business during this calendar year had reflected seasonal conditions and was consistent with industry experience.
Mr Jackman said Elders was still in talks with parties interested in re-capitalising the company, but no binding or complete proposals had been received. The company has previously rejected a deal with the smaller Ruralcorp, which responded by poaching staff from Elders cattle business. That is now before the courts.
Ruralcorp releases its results later in the week.
Elders said the rural business’ earnings before interest and tax (EBIT) was affected by a $24.2 million charge related to accounting discrepancies in Elders’ live export business.
The company said the charge was needed to restate the global livestock trading balance sheet after the company identified that trading results had not been recorded in line with accounting policies and investigations are continuing into the accounting irregularities.
