While the coronavirus recession has shattered much of the Australian economy, agriculture's performance continues at pace with big agribusiness player Elders posting an 80 per cent profit jump to almost $123 million.
Bolstered by a rain-revived turnaround in cropping activity and restocking demand, and strong flow-on benefits from its recent takeover of Australian Independent Rural Retailers (AIRR), the farm services company has tipped earnings growth of up to 10pc for another three years, starting with much improved crop prospects this summer.
"Coronavirus has had no material impact on us so far," said managing director, Mark Allison.
Although some specific business categories experienced market price shocks, notably the wool market, Elders had not needed to tap any government JobKeeper funding, or cut staff or working hours across its 220 branch sites, or draw on a $50m working capital facility it established to provide emergency trading headroom when the pandemic hit.
He said rural property vendors who may have deferred selling decisions due to uncertainty about the COVID-19 market were experiencing high demand for their farmland which was expected to continue well into 2021.
The company had proven its diverse business model's resilience in a financial year when drought, bushfires and coronavirus had battered many in regional Australia.
We now have a business that can make good money in a bad year and great money in a good year
- Mark Allison, Elders
"We've controlled what we could control and had a positive outcome," he said.
Elders also grew its branch and wholesale rural supplies member network as reverberations continue across the sector after last year's Nutrien amalgamation of rivals Landmark and Ruralco.
Earnings jump
Revenue rose 29pc to $2.09 billion, underlying earnings before interest and tax jumped 60pc to $119.4m and underlying earnings per share grew 35pc on 2018-19 results to 70.7 cents.
Gross margin growth was recorded across all state geographies and products.
"Our solid business foundations and strict financial discipline, and a commitment to ensuring the safety and prosperity of clients, communities and staff, allowed us to succeed despite challenging operating conditions in FY20," Mr Allison said.
"We now have a business that can make good money in a bad year and great money in a good year."
Elders shareholders reap a 22 cents a share full-year dividend, up from 18c a year ago.
Rural products perform
A standout performer in the year to September 30 was the company's rural products division where crop protection product sales were fuelled by the return of better seasonal conditions across much of eastern Australia.
Retail sales grew 18pc despite a slow, droughty start to the financial year.
Elders' 10-month ownership of rural supplies wholesaler AIRR added $44m in wholesale gross margin - well in excess of projections.
AIRR's big portfolio of house brand crop protection and veterinary products, combined with growth in Elders' Titan chemical product sales, were expected to make even more impact as the farm supplies division bedded down and attracted more new retailer members in 2020-21.
Elders' agency business made up for the softer wool market values and trading volumes with higher revenues from strong livestock prices, particularly with cattle at historic highs.
Real estate services achieved strong growth, too, and financial services delivered better than expected returns from the new Livestock in Transit delivery warranty product and a newly launched $100,000 working capital finance offer to clients needing short term funds.
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The company's revamped eight point plan to guide its business priorities for the next three years has targeted earnings growth of five-10pc and return on capital of 15pc - down from 20pc during the past six years.
Other priorities include expanding Elders' product and services footprint with strategic acquisitions, and an increasing reliance on organic business growth based around providing greater and stronger services to livestock, wool real estate and technical services clients.
Significant growth opportunities existed to gain market share by serving new customers, in new geographies with the company's multiple product and service portfolios, Mr Allison said.
Outlook positive
In the immediate future he tipped demand for crop protection and fertiliser to recover after a mid-year lull, thanks to a leap in summer crop plantings.
Beef prices were likely to remain relatively high, but restocker pressures would generally ease in cattle markets.
Reduced apparel demand and disrupted clothing supply chains could suppress wool and sheep market activity in the near-term, although sheep prices were likely to stay higher than their five-year historical average.
"The outlook for all agriculture is relatively positive, but the one cloud on the horizon has been the geopolitical tension and market access issues we've seen," he said.
Although he felt "quite optimistic about how we will go with our China relationship", Mr Allison said non-China trade options represented a solid and significant platform for the diversification strategies agriculture needed.
Confirmation of the world's largest trade deal between 15 Asia Pacific nations, the Regional Comprehensive Economic Partnership, was positive for Australian agriculture.
The agreement, which includes China and another 14 countries such as South Korea, Japan and Indonesia, frees up terms of trade in goods and services, and cross-border investment.
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