While reporting their second best EBIT in ten years Elders draws attention to adverse market headwinds and softening prices hinting at agricultural declines
Elders board members will take a recommendation to pay shareholders a dividend of 23.0 cents per share, 30% franked when the company holds its Annual General Meeting on Thursday 14 December 2023 from 10.00am (ACDT).
Following the release of its results for the 12 months to 30 September 2023 (FW23) today, agribusiness leader Elders (ASX:ELD) has drawn attention to the softening market for agricultural commodities.
Elders recorded a strong FY23 earnings performance despite adverse market headwinds, including softening input prices for key agricultural chemicals, and a significant decline in livestock prices, as well as inflationary pressures and rising interest rates.
Elders’ product, channel and geographical diversification was key to mitigating those headwinds, which contributed to Elders’ second highest EBIT in the last 10 years.
Elders results at a glance
• EBIT of $170.8 million, down 26% on the prior year
• Statutory net profit after tax (NPAT) of $100.8 million, down 38% compared to the prior
year
• Underlying return on capital (ROC) of 16.0% which exceeds the target benchmark of 15% in
the Eight Point Plan
• Operating cash flow was a net inflow of $169.2 million, resulting in a cash conversion of
163%, which exceeds the target benchmark of 90% set out in Elders’ capital management
framework
The Directors have determined to pay a dividend of 23.0 cents per share, 30% franked.
Elders on target
In FY23, Elders entered the final year of its third Eight Point Plan, targeting 5% to 10% growth in EBIT and EPS through the agricultural cycles whilst maintaining strong financial discipline to generate a compelling ROC of at least 15%.
Managing Director and Chief Executive Officer, Mark Allison said Elders’ financial performance was resilient in FY23.
“The year was met with challenging trading conditions and despite this, Elders achieved its second highest EBIT result in the last 10 years,” Mark Allison explained.
“This resilience was achieved due to our geographically diverse multi-product portfolio, which generated strong average earnings across the group.
“We did not compromise on financial discipline to achieve this result, with operating cash flow at a new inflow of $169.2 million, resulting in a cash conversion of 163%, which well exceeds the target benchmark of 90% set out in our capital management framework.
“This allowed us to declare dividends totalling 46 cents per share.”
Elders remained committed to business transformation projects which are expected to deliver short and long-term benefits, including Systems Modernisation and Elders Wool.
“The new Elders Wool business reached significant milestones with practical completion of the Ravenhall facility in Victoria and the opening of the Rockingham facility, delivering an improved level of customer service in Western Australia,” Mark Allison added.
Elders also today released its FY23 Sustainability Report which evidenced its work throughout the year to deliver industry leading sustainability outcomes across a range of areas, including climate change, waste management, and community impact and investment.
“A highlight this year was the establishment of Thomas Elder Sustainable Farming (TESA) to improve access for farmers to technology, information and markets that help them to grow productivity whilst operating under more sustainable farming models,” Mark Allison outlined.
“We also made significant progress in our waste management activities, diverting 46,000 chemical containers from landfill and collecting 2.18 tonnes in plastic bags for recycling.”
Looking forward, Mr Allison said that FY24 presents significant opportunities for Elders to grow and support customers through the company’s fourth Eight Point Plan.
“We expect some of the market headwinds experienced in FY23 to continue into FY24 but we are well placed to pursue opportunities for further growth and diversification. As the most trusted agribusiness brand amongst farmers, we will continue to deliver value to our customers, existing and new.
“Our priority is supporting the sustainable growth of the agriculture industry and the wellbeing of our rural communities. This means we remain focused on ensuring access to high quality products and advice that optimise efficiency and profitability, particularly in times where markets and commodities are more challenging,” Mark Allison concluded.
