The Elders Ltd (ASX: ELD) share price is up slightly as investors digest the company's update on the impact of bushfires in Australia.
How have the bushfires impacted Elders?
Elders released an announcement to the ASX this afternoon providing an update on how the bushfires in Australia have impacted the company's operations. According to the update, no property owned by Elders has been damaged by the bushfires and all branches remain operational.
Although the company believes it's too early to assess the full magnitude of the bushfires, Elders expects that livestock commissions will be negatively impacted. However, the agricultural services group anticipates that these losses will be offset by an increased demand in farm supplies once the fires cease and rebuilding efforts begin. As a result, Elders notified the ASX that expectations are in line for the first quarter of FY20 and the company maintains its full-year guidance.
In the update, Elders also acknowledged that the safety of its employees remains top priority. The company also recognised the hardship that may be experienced by clients by offering relief options for impacted clients. In addition, the company confirmed it will be financially contributing to the rebuild effort, including an initial $100,000 donation to the Foundation for Rural and Regional Renewal.
At the time of writing, the Elders share price is trading up slightly following the market update.
What is the outlook for Elders?
Elders is a leading supplier of fertiliser, chemicals and animal health products to regional and rural Australia. The company also has strong exposure to livestock, wool and real estate.
The Elders share price struggled in 2019 after falling drastically from its 2018 highs. The company's share price has been impacted by ongoing dry conditions across eastern Australia.
Late last year, the company delivered a full-year statutory profit after tax of $68.9 million, which was a 3.8% decline from the prior corresponding period. Elders also generated an operating cash flow of $11.2 million and reported and an underlying return on capital of 18.2% for the year. Elders management believe that the strong performance in difficult trading conditions reflect the benefits of diversification and the company's resilient business model.
Rainfall will be the ultimate catalyst that can help Elders realise its full earnings potential. Market analysts estimate that under normalised trading conditions, Elders should deliver earnings before interest, tax, depreciation and amortisation in the range of $130–140 million for FY20.
