Elders reports a half-billion-dollar loss

The rural services company continues to struggle along.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Struggling rural services company Elders (ASX: ELD) has reported a statutory loss of $505.2 million for the financial year ending 30 September 2013. The reported loss includes non-cash impairment charges and other non-recurring items that totalled $442.2 million. Excluding these items Elders underlying loss was $63 million and compares to an underlying loss in the prior year of $10.6 million.

It's tough for shareholders to find too much joy in Elders' results except for the acknowledgement that with the final stage of the five-year restructuring and turn-around program underway Elders can now be considered a "pure-play" agribusiness. (There is still some work to do to complete the wind-down and asset divestment of the forestry division.) Management also announced that they continued to make in-roads on reducing the company's debt with net debt declining a further $40.1 million over the year to $255.2 million.

Elder's woes have provided very poor investment returns for shareholders. Interestingly, the rural services space has in general also been a difficult sector for investors, particularly when compared with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), which is up nearly 24% over the past 12 months.

For comparison, Elders shares are down around 22% in the past year, while its closest listed peer, Ruralco Holdings (ASX: RHL), which has also previously approached Elders with a buy-out offer, is up just 3.8%. Meanwhile stock feed and animal feed supplement producer Ridley Corp's (ASX: RIC) share price is down nearly 22% and Incitec Pivot (ASX: IPL), which has a large fertiliser division (but which is also heavily influenced by the mining sector given its explosives division) is down 9%.

Foolish takeaway

The performance of companies that supply inputs to the agricultural industry is a reminder to investors that not all companies are created equally. While food producers such as Tassal (ASX: TGR) and Bega Cheese (ASX: BGA) are seeing their share prices hit multi-year highs, their leverage and profitability to growing demands for food are such that these firms are much better placed than the input suppliers to boost their profits.

Motley Fool contributor Tim McArthur owns shares in Tassal.  

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »