Why is this ASX 200 share crashing 14% today?

Elders has been sold off on Monday. But why?

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The Elders Ltd (ASX: ELD) share price is having another difficult day on Monday.

In morning trade, the agribusiness company's shares are down 14% to $6.13.

This means that the ASX 200 share is now down approximately 50% since this time last year.

Why is this ASX 200 share being sold off?

Investors have been selling Elders shares this morning after the company downgraded its guidance for FY 2023.

According to the release, for the 12 months ended 30 September, Elders now expects its underlying earnings before interest and tax (EBIT) to be between $165 million and $175 million. This is down from its previous guidance range of between $180 million and $200 million.

It will also be a sharp 25% to 29% decline from FY 2022's underlying EBIT of $232.1 million

One small positive is that despite this revision, Elders continues to target cash conversion of greater than 90% of underlying NPAT.

Why did Elders downgrade its guidance?

Management advised that this downgrade followed a review of its July year to date financial results and month to date trading in August.

That review found that Rural Products sales in recent weeks have been lower than forecast.

In addition, a greater than forecast pressure on its Rural Product gross margin, especially in crop protection products, has weighed on its profits. As has further weakness in the prices of cattle and sheep with a lower-than-forecast offset from volumes traded.

When will things improve?

Also potentially putting pressure on this ASX 200 share was management's commentary on its outlook.

It revealed that Elders is experiencing cautious customer sentiment in light of uncertain seasonal conditions in some farming regions, compared to forecast assumptions.

This uncertainty is now supported by the Bureau of Meteorology's long-range forecast for September to November. That forecast predicts a heightened probability of warmer and drier than average conditions in Eastern and Western parts of Australia and the risk of an El Nino declaration.

This appears to suggest that it could have a soft start to FY 2024 in October.

Motley Fool contributor James Mickleboro 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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