Shares in Elders hit decades high after a profit upgrade that reflected the strength of the Australian agricultural sector

Farmers are enjoying bumper seasonal conditions and buying up a range of crop protection and animal health products to help send Elders’s profit racing ahead.

Elders chief executive Mark Allison has overseen a transformation of the historic Australian company which is now enjoying the fruits of a strong agricultural sector.

Shares in Elders soared 11 per cent to a decade high as a combination of bumper seasonal conditions and fears of supply chain disruptions pushed many growers to order their herbicides and insecticides early, helping the agricultural services company beat profit forecasts.

Its acquisition strategy as well as developing its own portfolio of home brand or private label goods for crop protection and animal health also fattened its profit margins.

Elders – one of Australia’s oldest companies, founded in 1839 – said on Monday it expected to report full-year 2022 underlying EBIT in the range of 20-30 per cent above fiscal 2021.

The improved outlook exceeded market expectations, as calculated from the mid-point of the earnings forecasts of sell-side analysts covering Elders.

Investors leapt on the positive earnings outlook and further signs the nation’s agricultural sector was doing well, despite the devastating impact of the floods on farmlands in NSW and Queensland, sending Elders shares up $1.32 or 11 per cent to $13.32.

Elders has transformed its operations and financial performance since the Global Financial Crisis in 2008, when its debt levels ballooned to $1.4bn and the historic Australian company nearly collapsed.

Now it is in a sweet spot with exceptional growing conditions across most of Australia, many farming businesses cashed-up and looking to upgrade their equipment, and even the Covid-19 pandemic triggering an exodus of people from the city to the country, to the benefit of Elders’ property sales business.

On Monday Elders chief executive Mark Allison said the company’s performance so far this financial year had been strong and surpassed its performance in the first five months of fiscal 2021.

“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 … (20 to 30 per cent above) … which is necessarily broad given we are only five months into our financial year,” Mr Allison said.

He said Elders had witnessed improvement in its retail and wholesale segments compared with the same time last financial year due to increased sales and favourable seasonal conditions in most parts of Australia.

“While we believe some of these sales are forward purchasing by primary producers seeking to mitigate the risk of instability in supply chains, we consider the majority of sales are a result of increased activity,” he said.

Mr Allison said the Elders agency business continued to perform strongly as a result of high prices in both sheep and cattle, offset to some extent by lower volumes due to restocking and the good availability of feed on farm.

Real estate also exceeded expectations because of increased turnover and high demand. The increase in activity is due to a combination of market and seasonal factors, acquisition growth and organic growth.

The improved guidance was subject to a number of caveats, including the potential of supply chain disruptions as a result of Covid-19 and geopolitical events, unexpected changes to seasonal conditions and severe weather events and unexpected changes in commodity prices.

In November Elders posted a 22 per cent increase in full-year net profit to $149.77m for the 12 months to September 30, as a number of powerful macroeconomic trends helped drive demand for its range of pesticides and chemicals, as well as a real estate boom that is lifting property prices for farms and rural homes.