The Elders Ltd (ASX: ELD) share price started the day in the red, but has turned around following the company's release of its FY20 results. During market open, shares in the agribusiness company fell as low as $11.63, before rebounding above Friday's market close. At the time of writing, the Elders share price is fractionally higher at $11.88, up 0.59% so far today.
Let's take a look and see how Elders performed in the 2020 financial year.
What's drving the Elder share price?
The Elders share price is on the rise this morning as, for the 12 months ending 30 September, the company reported a robust scorecard despite being effected by drought, bushfires and COVID-19.
Sales revenue increased to $2,092.6 million, representing a 29% gain over the FY19 result. The performance was underpinned by Elders' retail products which benefitted from a strong winter cropping season. In addition, its agency services saw an upside mostly in livestock, primarily driven by high prices for both cattle and sheep.
Underlying profit after tax grew to $109 million, up 71% from the $63.6 million recorded in the prior corresponding period.
Underlying earnings before interest and tax (EBIT) swelled to $119.4 million, a jump of 62% over the same time last year.
Pleasingly for investors, earnings per share (EPS) rose to 70.7 cents, shooting 35% higher. This reflected gross margin growth, tight cost control and reduced capital spending across the business.
Elders declared a fully-franked dividend of 13 cents per share to be paid to shareholders on 18 December. This brings the annual dividend payment to 22 cents, a 22% lift on FY19's pay-out.
Management commentary
Elders CEO and managing director, Mr Mark Allison, commented on the performance of the business. He said:
Our solid business foundations and strict financial discipline, together with a commitment to ensuring the safety and prosperity of clients, communities and staff across Australia allowed us to succeed despite challenging operating conditions in FY20.
When the COVID-19 pandemic emerged, we proactively established a COVID-19 Response Committee that convened almost daily to monitor the evolving situation and respond swiftly. We focused on minimising the risk to our employees and the communities we operate in whilst also ensuring we could continue to serve our clients and play our part in keeping the food supply chain operating.
Launch of third eight-point plan
As a part of creating a leaner business model, Elders closed out its second eight-point plan in FY20. The company achieved its objectives of providing consistent financial returns on agricultural cycles.
Embarking on its third eight-point plan, management said:
Under our newly launched Eight Point Plan, we have again set ambitious financial goals – we are targeting 5 to 10% growth in EBIT and EPS through the agricultural cycles at a compelling ROC of 15%.
In addition, in this plan we have introduced new non-financial goals around sustainability and brand trust. Also new is the Systems Modernisation Program – a multi-year investment in a new, best of breed operating platform that will improve client experience and enable internal efficiencies.
FY21 outlook
Looking towards the remainder of FY21, Elders is forecasting its summer crop to rebound from its low levels last year. The company revealed it is seeing a recovery in demand for crop protection and fertiliser.
Cattle prices are expected to soften from the record high prices seen in FY20. However, Elders anticipates the prices to remain in the high-range.
Consumer demand for apparel is predicted to reduce as clothing supply chains have raised levels of unsold textiles and raw fibres. This is likely to lead to wool prices falling in the near term.
Moving across to its farmland segment, farm owners have been deferring their decision to sell due to the uncertainties surrounding COVID-19, which has driven up farmland values.
About the Elders share price
At the time of writing, the Elders share price is trading 3.3% below its 52-week high. It has, however increased a whopping 84% year to date.
