ELDERS shares have gone on a rollercoaster ride as investors seek to make sense of the company’s annual results.
Shares in the agribusiness surged by almost 20 per cent on Monday, hitting a high of $8.87 a share from Friday’s close of $7.41, before giving up most of those gains to sit at $7,70 as of Wednesday morning.
At face value, the Elders result was well down year year with net profit after tax of $71.6 million, down from $116 million in 2017.
However, once a one-off brand name impairment reversals of $38.3 million, which bolstered the 2017 profit, was taken out, profits were in line with last year.
The market initially viewed this result with positivity given the tough seasonal conditions for much of the nation’s agricultural heartland, but later retreated from that position.
It leaves the Elders share price at a marked discount of the highs of around $9.40 reached in June, but still at close to four times the lows reached four or five years ago.
In handing down the results, Elders chief executive Mark Allison said the company would continue to ambitiously push for growth, saying the drought presented acquisition oppportunities in northern Australia.
He said the company was in a fundamentally strong position, pointing to strong earnings before interest and tax (EBIT) of $74.6 million, driven by good performances in the retail business from acquisition growth.
Mr Allison said Elders’ agency footprint had expanded with the acquisition of western Victorian-based Kerr & Co Livestock in December 2017.
On the retail side he said the acquisition of NSW-based chemical manufacturer and supplier TitanAg had extended Elders’ participation in the supply chain for agricultural chemicals, while the company has also extended its reach in the SA horticulture market.
Meanwhile, Ruralco announced an underlying net profit after tax of $28.8 million for the full year – up 10 per cent on 2017. RuralCo’s revenue was also up 5pc to $1.9 billion.
Investors were also pleased with the result, with shares rising from $2.85 on Friday to $3.12 midway through Tuesday, a rise of 9.3pc.
It was seen as a good result given the drought, with Ruralco chief executive Travis Dillon saying geographical and activity diversification have eased the impact of mixed seasonal conditions across the country in what has been a challenging year for the sector.
Mr Dillon said drought had tested Ruralco’s strategy and reinforced the importance of building a diversified earnings base.
“The fact that the company has achieved profit growth despite the difficult seasonal conditions confirms the sustainability of Ruralco’s business model,” he said.
“Significant progress has been made on delivering our strategic priorities with 10 new branch locations, both acquired and greenfield, nearly $2.7 million invested in innovative AgTech start-ups and significant growth in our finance products, which are tailored to suit the needs of our customers.
“It is also pleasing to see our water services division continue to increase its contribution to total gross profit, reinforcing the fact that water is and will continue to be a fundamental input to farming.”