Elders share price plummets as half-year profit dumps 46%

We take a look at the company's first-half results.

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Key points

  • The Elders share price is tumbling today, falling 7.5% to trade at $7.675 at the time of writing
  • It follows the release of the agribusiness company's first half earnings, detailing a 46% fall in profits for the period
  • Its suffering came amid softening livestock trading conditions, weaker crop output, and unseasonably wet weather

The Elders Ltd (ASX: ELD) share price is deep in the red after the company dropped seemingly disappointing earnings for the first half of financial year 2023.

Right now, stock in the S&P/ASX 200 Index (ASX: XJO) agribusiness company is trading for $7.675, 7.53% lower than its previous close.

Elders share price tumbles 7% amid industry challenges

Here are the key takeaways from the company's first-half results:

  • Revenue jumped 9% on the prior comparable period (pcp) to $1.66 billion
  • Profit after tax tumbled 47% to $48.8 million
  • Underlying earnings before interest and tax (EBIT) slumped 38% to $82.8 million
  • Underlying earnings per share (EPS) dropped 45% to 32.3 cents
  • Operating cash flow dropped 57% to an $86.9 million loss
  • 23 cents per share, 30% franked, interim dividend declared – an 18% drop on that of the pcp

Last half was volatile for the agriculture industry, with Elders among those bearing the brunt. The six months ended 31 March saw softer livestock trading conditions, weaker crop input prices, and wet weather.

Comparatively, the prior period was a ripper one for the industry, helped by livestock prices, real estate, and positive supply chain impacts.

What else happened last half?

Turning to the company's business segments, its wholesales products leg saw a $10.2 million jump in sales, thanks to its expanding footprint and backwards-integration but offset by falling crop input prices.

Softening crop input prices and sales mix composition also weighed on margins in its retail products segment. That was despite increased sales across fertiliser, animal health, and crop protection products.

Its agency services leg saw earnings fall 22.1% amid lower prices for cattle and sheep while higher property management earnings at its real estate services segment were offset by lower broadacre turnover.

Finally, revenue continued to grow in its financial services business, helped by demand for insurance products and rising premiums.

What did management say?

Elders CEO and managing director Mark Allison commented on the results weighing on the company's share price, saying:

Financial year 2022 was unusual with EBIT greater in the first half than the second, primarily because clients brought forward their winter crop procurement due to supply concerns and rising input prices.

The freeing up of supply chains, lower freight costs and more sustainable fertiliser prices are a great benefit to the agricultural industry but make comparison between [the first half of financial year 2023] and [the first half of financial year 2022] challenging.

Consequently, Elders has taken the decision to provide full year guidance to reinforce our expectation that second half earnings are likely to exceed the first half, a more typical earnings profile for Elders.

What's next?

As Allison noted, the company expects the current half to be a better one for its bottom line.

It's forecasting its full-year EBIT to come in between $180 million and $200 million. That would mark an 18.1% fall on that of financial year 2022 and a 13.8% jump on that of financial year 2021.

The company is also searching for Allison's successor and expects to release a further announcement next month.

Elders share price snapshot

The Elders share price has been suffering as of late.

Today's fall included, the stock has tumbled 24% since the start of 2023. It's also 45% lower than it was this time last year.

For comparison, the ASX 200 has gained 4% so far this year and 2% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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. 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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