Elders (ELD) Earnings Update
Date: 13/11/2023
*** GENERAL AVICE ONLY***
Current holding 3.5% – Balanced Portfolio
The positive update from Elders and increase of dividend means the Balanced portfolio will continue to HOLD the position until further notice
Financial Statement Performance
Elders’ FY23 results demonstrated resilience amid challenging market conditions. The company reported an underlying EBIT of $170.8 million, which, while down by 26% from FY22, closely aligned with their revised profit guidance. This performance was critical in driving positive market sentiment, especially since Elders managed to meet their underlying EBIT guidance. Additionally, the reported EPS of 66.3 cents exceeded analyst expectations, contributing to the market’s positive reaction.
Business Segment
- Retail Products: Saw growth through the Titan AG integration, despite challenges from lower input prices in crop protection and fertiliser segments.
- Wholesale Products: Experienced sales growth, albeit with margin pressures in key products due to falling input prices.
- Agency Services: Faced margin decreases due to declining livestock prices, countered partially by increased sheep volumes.
- Real Estate Services: Margins declined due to rising interest rates and slower turnover in broadacre and residential areas, partially offset by growth in property management.
- Financial Services: Improved performance, largely attributed to the Elders Insurance business and own balance sheet livestock lending.
- Feed and Processing Services: Faced margin pressures due to higher cattle prices at Killara Feedlot.
Performance Amid El Niño Expectations
Elders navigated the FY23 with the looming uncertainty of El Niño. The company’s diverse portfolio and strategic approaches helped mitigate the impacts of potential drier conditions associated with El Niño, ensuring operational resilience and maintaining profitability across various segments.
FY24 Outlook
- Overall Expectations: Elders anticipates potential challenges, including declines in summer crop production due to dry and El Niño conditions. However, margin recovery in Rural Products is expected with more sustainable input prices.
- Agency Services: Forecasts growth in cattle and sheep volumes, with wool prices expected to remain steady.
- Real Estate: May face challenges due to interest rate pressures and market conditions.
Financial Services: Expects increased activity in livestock funding products and brokerage services. - Killara Feedlot: Likely to benefit from lower cattle prices and operational expansions.
Market Reaction
Following the release of FY23 results, Elders experienced a notable positive market reaction, with share returns exceeding 10%.
Key factors influencing this response included:
- Meeting underlying EBIT guidance, which was a significant market focus.
- EPS of 66.3 cents surpassing analyst expectations, reflecting stronger-than-expected profitability.
- A final dividend per share (DPS) of 46 cents, which was higher than market expectations, signaling robust financial health and commitment to shareholder returns.
Disclaimer: The recommendation given is general advice only. It does not take into account your personal objectives, financial situation, or specific needs. This information should not be your sole resource when making such decisions. We strongly recommend you to seek the advice of financial, taxation, and legal professionals before finalising any investment decisions.