Elders (ASX:ELD) share price slips despite 22% profit leap

Favourable seasonal conditions are expected to aid Australia’s summer crop.

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An older farmer stands arms crossed among his crop, staring across the field.

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The Elders Ltd (ASX: ELD) share price closed Monday down 0.74%, after initially jumping 2.8% higher following this morning’s opening bell.

Elders’ shares slipped despite reporting a significant lift in sales and profits for the full 2021 financial year (FY21). Meanwhile, the S&P/ASX 200 Index (ASX: XJO) finished the day 0.36% higher.

Below we look at those FY21 results, for the 12 months to 30 September 2021, released by the Aussie agribusiness giant this morning.

Elders share price slips despite FY21 profit boost

In this morning’s ASX release, Elders reported its FY21 results:

  • Sales revenue of $2.548 billion, a 22% year-on-year increase
  • Statutory profit after tax of $149.8 million, up 22%, or $26.9 million, from FY20
  • Underlying earnings before interest and taxes (EBIT) of $166.5 million, a 38% increase from FY20’s $120.6 million
  • Total dividends of 42 cents per share, 20% franked. That’s a 91% increase from the previous year, when dividends were fully franked.

What happened during the reporting period for Elders?

The company reported improved financial performance across all its product areas and locations, aside from its Feed and Processing business. That segment came under pressure from higher feeder cattle prices.

The 2021 financial year saw Elders implement the first year of its third Eight Point Plan. That plan saw the company target 5%–10% growth in EBIT and EPS (earnings per share) through the agricultural cycles. Further, Elders was targeting a return on capital (ROC) of at least 15%.

The business exceeded all of those metrics. EBIT and EPS increased by 38% in FY21, while ROC grew by 22.5%.

Elders attributed its growth strategy, which targets 50% of growth from acquisitions, for the strong results.

What did management say?

Commenting on the results, Elders CEO Mark Allison said:

We have made tremendous progress on our current Eight Point Plan and are well positioned to continue our growth into FY22. We have built our business to perform well in challenging years and to outperform in better years.

With our focus on safety, sustainability, innovation and financial discipline, we have laid the groundwork for sustained growth in FY22 and beyond. Significant opportunities remain to gain market share by serving new and existing customers in new and existing geographies with our multiple product and service portfolios. There is also significant value to be extracted from further improvements in our existing business as we continue to implement our third Eight Point Plan.

What’s next for the Elders share price?

Looking ahead, the company has forecast favourable seasonal conditions and high demand for agricultural commodities in the first half of FY22. This could provide some tailwinds for the Elders share price.

It reported actively managing global supply chain disruptions through “forward orders and risk diversification” across its suppliers.

Elders expects the summer crop to drive strong demand for agricultural chemicals, fertiliser and seed. This gives a positive outlook for its Rural Products segment.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. 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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