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Elders Ltd still wants to grow by acquisition

Shares in Australian agribusiness company Elders Ltd (ASX: ELD) have dropped into the red, down 1.6% to $9.23 off the back of an investor presentation released yesterday.

Elders reported improvements across the business with a strategic intent to achieve sustainable growth in EBIT and 20% ROC by 2020 by “providing value creating products and services on a global scale”.

But investors have not reacted favourably to the update today despite an uptick in share price for the last 12 months with first-half results coming in strong as underlying net profit rose $4.5 million to $39.7 million and underlying EBITDA went up $4.5 million to $47.8 million. Operating cash flow zoomed up from $5.3 million in the previous corresponding period to $26.1 million.

Most segments of the business have been boosted by recent acquisitions with the FY18 outlook expected to see an ease off in cattle prices, offset by Elder’s expanding footprint due to acquisition growth.

Agribusiness stocks can be hard hit by environmental and weather conditions, with other strong players such as Nufarm Limited (ASX: NUF) and Graincorp Ltd (ASX: GNC) particularly susceptible to dry season issues plaguing crop growers.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. 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 Scott Phillips.

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