Elders’ profit up 80 per cent

Drought, bushfire and COVID-19 did little to dent rural services company Elders’ strong profits in the 12 months to September.

Elders chief executive Mark Allison says the outlook for the year ahead is “relatively positive” following a tumultuous 2019-20.

ELDERS has defied the impact of drought, bushfire and COVID-19 to record an 80-per-cent rise in statutory profit after tax to $124.2 million in the 12 months to September.

The 181-year-old company, Australia’s only listed rural services provider, has reported underlying earnings before interest and tax of $119.4 million, an increase of 62 per cent on the prior year, while earnings per share are at a high of 70.7 cents, up 35 per cent on last year.

The company’s strong annual results exceeded its ambitious expectations of net profit after tax of between $85.8 million and $102.9 million, flagged by Elders managing director Mark Allison in May.

Mr Allison said the result was in line with the company’s mantra of making good returns in bad years, and great returns in good years.

“Our philosophy is to control what we can control and not dwell on what we can’t control. This result is a great result in a good year, where we’ve seen the drought break,” he said.

When asked how Elders had managed to dodge the catastrophes of bushfire and a pandemic better than many other listed businesses whose earnings have dived this year, he said “You just have to be calm.”

“We guaranteed that no one would be let go during COVID. The strategy was set-up six years before. People in the bush just get on with life. We moved very quickly to contactless servicing. We firmed up our supply chains out of China. We made sure everyone was safe.”

In tandem with management’s steady keel, the year was underpinned by gross margin growth across Elders’ entire product portfolio, from real estate to retail and wholesale products and agency services, and growth in all states.

Retail products benefited from a strong winter cropping season, which offset a poor summer crop and earlier dry conditions. Underlying profit was up most in Elders’ southern Australian business, which was up 36 per cent to $54.3 million off the back of high livestock prices and cattle turnover and an increase in retail product sales. These higher livestock prices also offset a soft wool market.

Elders’ real estate services division witnessed strong growth. Despite listings being down 10 per cent across the year, this was compensated for by increased broad acre and residential turnover.

The completion of the company’s $157 million purchase of Australian Independent Rural Retailers 10 months ago added $44 million in wholesale gross margin, which Mr Allison said was well in excess of earlier projections.

Mr Allison said the company was planning ahead for an average season. “The outlook is relatively positive, the one cloud on the horizon has been the geopolitical tension and market access. (But) the announcement of the Regional Comprehensive Economic Partnership is very positive for Australian agriculture. It sets a very positive platform for the diversification of Australian agriculture that we’ve talked about needing,” he said.

The trade deal was signed on Sunday by China and another 14 countries in the Asia-Pacific region including Japan, New Zealand and South Korea that sets out the terms of trade in goods and services, cross-border investment and intellectual property.

He said demand for crop protection and fertiliser was expected to recover due to increases in summer crop plantings, and cattle prices were forecast to remain high, however wool prices were likely to remain low for the near-term.

Demand for farmland is predicted to remain strong as many potential sellers were deferring putting their properties on the market due to COVID-19 uncertainty, underpinning robust farmland values.

Elders will pay a fully-franked final dividend of 13 cents per share, taking total dividends for the year to 22 cents, up 4 cents a share on the previous year.

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