Elders Ltd (ASX: ELD) shares are having a poor start to the day.
In morning trade, the ASX 200 stock is down 13% to $6.35.
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Why is this ASX 200 stock crashing?
Investors have been selling the agribusiness company's shares today after a big announcement was overshadowed by a disappointing trading update.
In regard to the former, the Australian Competition and Consumer Commission (ACCC) has revealed that it will not oppose Elders' acquisition of Delta Agribusiness. This is subject to an undertaking given pursuant to section 87B of the Competition and Consumer Act 2010.
According to the release, that undertaking will see six Delta branches in Western Australia divested. These branches are located in Dalwallinu, Kalannie, Albany, Manypeaks, Wellstead and Hyden.
However, the total FY 2025 underlying EBIT of the six branches to be divested is estimated to be less than $300,000.
Commenting on the news, the ASX 200 stock's managing director and CEO, Mark Allison, said:
We are pleased with the outcome of the ACCC's deliberation and are looking forward to supporting Delta in the next phase of its growth post-completion. Elders has always maintained that the transaction will not lessen competition in rural merchandise markets in Australia and will ultimately benefit farmers. It is our intent to leverage the respective strengths and local knowledge of both companies to offer the best service and solutions for our farming clients.
Elders expects the deal to complete on 3 November.
Trading update
The ASX 200 stock has also provided the market with a trading update before the market open. This is what is weighing heavily on its shares this morning.
It advised that Delta's FY 2025 performance was negatively impacted by lower retail sales resulting from dry conditions in southern Australia and a later start to the cropping season.
In addition, its margins were impacted by heightened competitive pricing resulting from the later season and desire from crop protection traders to avoid carry-over inventory.
Nevertheless, management notes that the outlook for Delta remains in line with assumptions that underpinned the acquisition thesis and equity raise in December 2024. It also notes that similar themes have been observed in Elders' business. Allison said:
Elders noted negative impacts from dry conditions to our Retail business, most pronounced in South Australia and Western Victoria. These impacts continued through April and May as drought conditions persisted.
Although conditions in these impacted areas significantly improved from June, resulting in increased demand for crop protection products in the fourth quarter, these improved trading conditions have not completely offset the impact from challenging conditions in the third quarter.
Nevertheless, for the 12 months ended 30 September, management still expects solid growth on the FY 2024 result. It advised that Elders' underlying EBIT for FY 2025 is expected to be in the range of $142 million to $146 million. Cash conversion is expected to be ahead of Elders' target. This appears to have been short of investor expectations.
