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Here’s why the Elders Ltd share price is bounding higher

The Elders Ltd (ASX: ELD) share price has leapt higher following the release of its 2017 half year financial report.

Here are the key takeaways from the Elders first half report:

  • Revenue up 4% to $774 million
  • Profit up 56% to $38 million
  • No dividends were declared
  • Net debt of $142 million

The agricultural company said improved seasonal conditions and geographical growth helped it achieve the impressive result.

“Our retail arm has again outperformed the prior corresponding period, with a $6.5 million improvement in earnings, driven by normalised summer conditions and geographical expansion, including the recruitment of high performing staff in Tasmania and New South Wales,” Elders CEO Mark Allison said.

“Earnings from our agency services business improved on the prior corresponding period with an increase of $5.8 million, driven by record livestock and wool prices across the country, and benefits from footprint growth.”

Elders’ business extends from retail sales of agricultural products to live export and real estate.

Pleasingly, during the period the company was able to clean up its balance sheet, removing its legacy ‘hybrid capital’, which stopped the business from paying dividends to shareholders. In addition to its operational goals, the company said it is on-track to resume paying dividends in its 2017 financial year.


“Building on our key relationships remains a priority for FY17, delivering expanded product offerings and engagement tools for our clients and stakeholders,” Mr Allison added. “High prices for both sheep and cattle are likely to continue in the short term and then subside as volumes increase later in the year.”

The company expects to report full-year operating profit growth at the high end of its previous range of $60 million plus or minus 10%.

Foolish Takeaway

Elders shares have staged an impressive recovery over the past year, rising 14%.

Although the company has made very good progress with its Eight Point Plan, investors are reminded that agriculture can be tough and cyclical. Currently, the market environment appears very strong.

Nonetheless, along with Ruralco Holdings Ltd (ASX: RHL), Graincorp Ltd (ASX: GNC) and Australian Agricultural Company Ltd (ASX: AAC); Elders shares should be on long-term investors’ watchlists, in my opinion.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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