Well, well, a small miracle of Australian business, the struggling Elders (ELD) rural services group is close to reporting a profit and starting to use the hundreds of millions in previous losses.
In reaction, Elders shares rose in yesterday’s selling, ending the day up 8.7% at 12.5c.
But there’s no dividend for shareholders, and shareholders will wait a while for that to occur.
It is not out of the woods yet, but if you exclude another round of one-off items (smaller than in previous years), Elders reported a half year profit of $6.7 million, from a loss of $23.7 million in the first half of 2012-13 (again excluding one-off items).
Despite the turnaround in operating business performance, Elders reported a statutory loss of $10.2 million for the six months ended March 31.
But that loss was a huge improvement on the $303.2 million statutory loss – driven by massive impairment charges – in the same period last year.
Significant items including a negative $20.4 million fair value readjustment to an investment and a $3.7million impairment to the company’s New Zealand network contributed to the statutory loss.
ELD 1Y – Elders turning the corner after years of value destruction
Elders chief executive Mark Allison said the result represents an early milestone in the journey to becoming a value-generating investment for shareholders.
"We’ve moved form incurring underlying losses to generating underlying profit and it is pleasing that every part of the business delivered improved results – in spite of variable seasonal conditions which included drought in much of north-eastern Australia," he said in a statement.
Mr Allison became CEO in April from the executive chairman role while the Elders board was very small.
Net debt fell 25% on the same period last year to $236.6 million.
Mr Allison said in his statement, "The second half outlook is positive, subject to seasonal conditions, and we expect ongoing improvement against last year’s results”.
Elders had cut costs and debt, improved margins, and lifted cash flow, he said.
The company’s traditional operations – livestock, wool, real estate and grain – had made the biggest contribution to improved margins, and the live export business was growing strongly, Mr Allison said.
But a note of caution. With the Weather Bureau forecasting a 70% or better chance of an El Nino dry weather period occurring later this year into 2015, Elders and other companies servicing the rural sector could be in for a rough ride.
