Elders shares dive 23pc as CEO Mark Allison announces ‘planned retirement’ as annual profit soars

Elders lost $475m in market value after announcing long-serving CEO Mark Allison would retire, and warned heavy rain was creating uncertainty around crop harvests.

Elders boss Mark Allison will retire from the company in November next year.

Elders lost some $475m in market value on Monday after the agribusiness major said its long-serving chief executive, Mark Allison, would retire and warned heavy rain was creating uncertainty around crop harvests.

The reaction from investors to Mr Allison’s impending departure shows how his name has become synonymous with the company. He first joined Elders in 2009 as it was fighting for its survival following the Global Financial Crisis, initially serving on the board as chairman before becoming managing director in 2014.

Under his stewardship, Mr Allison managed to stabilise the company, growing its earnings more than 30 per cent a year in the past eight years.

He is now looking forward to spending more time on his passion of singing and songwriting. He has already composed more than 140 songs and recorded 10 albums, five of which are available under the name of Mallison.

However, with heavy rain drenching Australia as the country experiences its third consecutive La Nina, it seems investors don’t want Mr Allison – who says he never takes weather maps into management meetings – to go.

“I flagged (my departure) three years ago. But the response, it seems, in this market uncertainty is not a good thing,” he said.

Elders shares fell 22.9 per cent to $10.21 – the lowest level since December 2020 – on Monday. That was despite the company planning an orderly departure. Mr Allison won’t be leaving until November next year.

While there are several promising internal candidates, the company’s board has embarked on an executive search. It underscores the difficulty of managing the departure of a chief executive, particularly a long-serving one, with Mr Allison’s exit overshadowing the announcement of solid full-year earnings from the group.

Investors dumped Elders shares after the agribusiness giant announced the retirement of its long-serving chief executive Mark Allison.

The company’s profit jumped 9 per cent to $162.9m in the 12 months to September 30. This compared with market expectations of $169.1m. Revenues surged 35 per cent to $3.45bn, following a bumper year for commodities.

Elders hiked its final dividend to 28 cents, which will be paid on December 16, taking the total investor payout for the year to 56c. This compares with 42c in 2021.

Shaw and Partners analyst Philip Pepe said apart from the uncertainty around rain, Elders’ outlook was “generally positive”, with demand for farm commodities expected to stay strong. Mr Allison’s departure was the only downer.

“(It is disappointing news re Mark Allison though he has done a fantastic job during his 10-year tenure,” Mr Pepe said. “In his time as managing director over the past eight years, underlying EBIT has grown by 31 per cent per annum. Our forecasts and rating are under review.”

As for the damaging weather forecast in coming months, Mr Allison is philosophical. He said the key of surviving and thriving in agribusiness is flexibility and not being backed into a corner.

“I’ve run many ag businesses – this is the seventh – and I’ve never had weather maps in management meetings at all. You have to be able to control what you can control,” he said.

“There may be a downside in some areas but there’s an upside in others. It’s about having flexibility and pragmatism and to be able to adapt relatively quickly. Hence always having the right capital and cost base so that you don’t get locked into a position where you can’t respond.”

He said he expected “high demand” for agricultural commodities will continue in the next six months but warned of uncertainty in the year ahead, following the severe wet weather from the third consecutive La Nina.

“Recent extreme rainfall events across the eastern states have created some uncertainty in affected cropping regions and concern about reaching full harvest potential for both summer and winter crops,” he said.

“The rural products outlook remains positive, with high demand particularly for agricultural chemicals, fertiliser and seed. However, the agricultural industry will await assessment of the full impact of the extreme wet conditions and flood events to realign expectations for the FY23 season.”

Mr Allison also said cattle and sheep prices were expected to soften in the medium term, driven by falls in domestic restocker demand, with “volumes also balancing out in the short term”.

“The wool market is expected to remain strong, driven by increased demand in China and Europe, pending production conditions improving following recent wet conditions and flood events in eastern Australia.”

In the past year, Elders’ rural products business outperformed expectations, Mr Allison said, delivering gross margin of $383.1m – a 35 per cent leap on the previous year. Its real estate division also delivered higher margins – up 21 per cent – to $61.6m as regional property prices continued to boom.

Meanwhile, the gross margin of its agency services firmed 4 per cent to $147m thanks to “strong livestock prices despite reduced volumes from limited domestic supply”. Overall, earnings before interest and tax jumped 39 per cent to $231.1m, with the company delivering a return on capital of 26.2 per cent – a 3.7 per cent improvement on last year.