Elders has joined GrainCorp in upgrading its 2022 financial outlook because of good growing conditions across much of the country which has seen many of its customers avoid the impact of the recent record rain and floods on the East Coast.
Elders told the ASX on Monday that told shareholders this morning expects its underlying earnings before interest and tax (EBIT) for the 2022 financial year to be 20-30% higher than in 2021, as a result of excellent weather conditions.
The news saw Elders shares climb 12% at one stage before settling back to end up 11% at $13.32.
(Elders clearly doesn’t do much business in the farming and horticultural areas around Brisbane, the northern rivers of NSW and Sydney.)
“After finalisation of the February trading numbers, which continue improved earnings for the first quarter, we now believe we will exceed analysts’ consensus for the full year to 30 September 2022 and produce an underlying EBIT result in the range – which is necessarily broad given we are only five months into our financial year,” Elders CEO Mark Allison said in the ASX release.
Market consensus is currently for EBIT growth of about 7% from $166.5 million in 2020-21 to $179 million in 2021-22.
The new forecast would see Elders deliver EBIT of between $200 million and $218 million in the current September 30 year.
Weather conditions and rising commodity prices (wheat, canola, meat) have offset the negatives from the wet weather in many regions – especially parts of the East Coast.
ABARES recently predicted the 2021-22 year would yield the highest-value harvest ever on record.
Elders said it has seen improvement in its retail and wholesale segments, though part of this boost comes from buyers wanting to side-step supply chain instability.
Elders’ agency business is also “perform[ing] strongly” thanks to high sheep and cattle prices, though offset by low stock volumes and availability of farm feed. Its real estate business is also performing well.
GrainCorp has upgraded its 2021-22 performance twice in recent months. The most recent was in early February when it revealed it expects 2022 profit to rise by at least 70% compared to last year, citing high global demand for Australian grain and oilseeds.
It was the second upgrade in less than two months from the East Coast grain handler.
Graincorp said net profit after tax in fiscal 2022 would come in the range of $235 million to $280 million, compared to $139 million posted in the previous year.
The company said its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) would be in the range of $480 – 540 million (FY21: $331 million), a rise of well over 70%.
GrainCorp shares got a boost yesterday from Elders’ news – the shares rose more than 3% to end at $8.73.
