Elders trades red for black

Elders trades red for black


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IT is one of the remarkable success stories of corporate Australia - turning the basket-case that was Elders, which was part of the unwieldy Futuris Corporation conglomerate, into a highly focused and once-again-profitable rural services business.

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Elders general manager and CEO Mark Allison and northern zone general manager Greg Dunne.

Elders general manager and CEO Mark Allison and northern zone general manager Greg Dunne.

IT is one of the remarkable success stories of corporate Australia - turning the basket-case that was Elders, which was part of the unwieldy Futuris Corporation conglomerate, into a highly focused and once-again-profitable rural services business.

In just two years, the iconic 176-year-old brand has gone from the constant threat of insolvency to a company which has focused on its clients, reduced its debt to zero and is again profitable.

The stunning turnaround follows the development of a three-year, eight-point plan and a "capital-light" business model developed by Elders' senior management in 2014. The plan focuses on growing earnings and market share around the company's areas of strength in delivering agency services.

Elders' business model is based on six specific areas:

  • Retail products including farm supplies and fertiliser.
  • Agency services for livestock, wool, grain and real estate.
  • Financial services including banking and insurance.
  • Feed and processing servicing including Killara Feedlot at Quirindi, NSW, Elders Indonesia and Elders China.
  • Short and long-haul livestock transport.
  • Online platforms including Agsure and a 50 percent stake in AuctionsPlus.

By 2017, new managing director Mark Allison says the plan is on track to deliver a sustainable EBIT (returns before interest and tax) of $60 million and ROC (return on capital) of 20pc by offering value-creating products and services in both Australia and internationally.

Elders's new direction has excited the market. Share prices went from trading in the sub-$2 range to a high of $3.53 at the end of January.

This week ELD was trading about the $3 mark.

Speaking from Elders' new offices in South Brisbane, Mr Allison said Elders would grow both its domestic and international businesses.

The company has 370 of what it calls points of presence across Australia, Indonesia and China. It has relationships with 40,000 customers and has positioned itself as a one-stop shop for primary producers and providing a range of services and advice.

Mr Allison said while there had been a fundamental change in the business, there was still a "long, long way to go".

This included ensuring geographic black spots in the business were minimised. More importantly, Elders had to be globally competitive, he said.

Mr Allison said during the past five years of lock-down, Elders had become so focused on its very survival that it lost skills in servicing its clients.

However, the business had now turned the corner and would build on Australia's domestic markets, as well as its proximity to Asian markets.

Mr Allison said Elders would seek to replicate in China the fully integrated supply chain already developed in Indonesia. Under that model, live cattle are exported, fed and processed and high-value beef is sold into the market.

There had already been developments in China and scoping carried out in Vietnam.

"Before Christmas where there was bare ground in China, there are now cattle in feedlots," Mr Allison said.

Group 'now has leadership'

Elders is a turnaround story based on its new management, says Morgans analyst Belinda Moore.

"If Elders can deliver on its strategy over coming years, its share price will be substantially higher than it is today," Ms Moore wrote in a briefing on the rural services business.

"With the divestment process now over, Elders has emerged as an agribusiness pure play (sic).

"The board has been restructured and now consists of individuals with extensive and diverse agribusiness experience.

"New managing director/chief executive officer Mark Allison has extensive experience in large rural services businesses.

"Elders' now has leadership and cash flow 100pc focused on it."

Ms Moore said a stronger Elders would be able to win back market share by attracting new or previous customers and staff with a quality offering, achieving sales and margin growth in its domestic and international target markets.

The story Elders trades red for black first appeared on Queensland Country Life.

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