Rain boosts Elders profit, share price jumps

Rain has given Elders’ fortunes a big boost, with profits 68 per cent higher and the share price jumping as a result.

Hallelujah: Rain has boosted Elders’ fortunes in the first half of 2019-20.

A RETURN to more normal seasonal conditions has helped Elders record a 68 per cent rise in underlying net profit after tax for the six months to March 31.

Elders’ underlying NPAT was $47.6 million, well up from the $28.3 million for the first six months of 2018-19.

Underlying earnings before interest and tax for the first half of the current year was $52.8 million, or 55 per cent higher than the $34 million recorded for the previous corresponding period.

Elders said Australian Independent Rural Retailers, which the company acquired last October, accounted for $8.6 million of EBIT.

Managing director Mark Allison said it was a “pretty solid performance” for the company.

Mr Allison said Elders was now on target for an NPAT of between $85.8 million and $102.9 million for the full year.

The Australian Securities Exchange reacted positively to the result, with Elders shares steadily rising throughout the first few hours of trading to nearly $1 higher to $10.40.

It has now settled back to $10.31, or 9.6 per cent higher than Friday’s close of $9.41.

Elders chief financial officer Richard Davey said the business finished very solidly in February and March.

Mr Davey said all geographical regions contributed to the financial performance except for Northern Australia, which included the Northern Territory, Queensland and northern NSW.

Mr Allison said the acquisition of AIRR had been “overwhelmingly positive”, reflected in its performance and integration into the existing Elders business.

AIRR brought 240 independent members stores into the business, eight warehouses and five retail locations.

Mr Allison said AIRR members and customers had remained loyal, with no loss of business since the acquisition received final approval at the end of October.

He said AIRR had delivered $3 million to $5 million in synergies to the business.

Mr Allison said rain had been the key for a number of sectors in the rural economy.

“At the end of last year, our view was that if there were successful, positive rainfall events … growers will plant from fence line to fence line to take advantage of the conditions to recoup from the previous two or three years of minimal crop and minimal cash flow,” he said.

“The outlook is positive from a domestic agricultural viewpoint.

“But we’ve got ongoing uncertainty in global markets.”

Mr Allison said good rain had driven restocking of cattle and sheep farms and he expected strong results for the beef and lamb industries.

But wool was likely to be impacted by coronavirus implications on apparel markets.

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