Elders goes on offensive, as suitors circle

Elders, the fallen Australian agribusiness icon which is attracting bid interest, set its sights on returning its operating profits to levels not seen for six years, through measures such as expanding abroad and in financial services.

Mark Allison, in his first major strategic move since becoming the Elders chief executive three months ago, unveiled an eight-point plan expected to "enhance growth prospects" through what it termed a "simplified agricultural focus".

The plan aims from the group's 2017 financial year to ensure Elders achieved a return of capital of 20%, and a "sustainable" operating profit of Aus$60m a year.

The group has not achieved an operating profit at this level, on an as-reported or underlying basis, since 2008 before, with elevated debt levels which forced it into talks with banks, the world financial crisis hit the group particularly badly.

While Elders has unveiled a series of plans since then, they have revolved largely around asset sales, most recently of forestry assets, and of the Futuris car parts division whose disposal returned Elders to being a pure-play agribusiness.

Analysts forecast the group reporting operating profits of Aus$26.7m for the year to this September, Aus$37.8m in its next financial year, and Aus$38.1m in the year to September 2016.

'Greatest real value to stakeholders'

Indeed, Mr Allison said that the plan unveiled on Monday "marks a significant step in Elders' evolution to being an efficient user of capital that produces acceptable returns for all its stakeholders.

"Whilst a lot of hard work is yet to be done to get there, and whilst agriculture is always subject to climactic and market conditions, we are confident that the foundations for growth are now in place and will be enhanced by the plan," Mr Allison said.

Through it, Elders, which at 175-years old is one of Australia's oldest companies, "seeks to reclaim its place as the agribusiness delivering the greatest real value to all is stakeholders in both Australia and internationally", he said.

Elders shares have been a dire bet for long-term investors, falling from a high of Aus$28.30 in June 2007 to a low of just 5.80 Australian dollar cents in May last year, although they have since staged a revival on hopes of reforms at last bearing fruit, besides of the potential for a bid.

The group earlier this month said it had received "a number of" approaches from potential, but said that none of the approaches was "definite and in a form capable of consideration by the Elders board".

Expansion ideas

The measures in the plan include development of a "capital light" model for the Elders farm supplies business, besides, in agency series such as wool and livestock marketing, an "innovative and mutually beneficial remuneration model" and "recruitment of key people".

In protein, the group is to set up an "integrated red meat supply chain model" serving the major markets of China, Indonesia and Vietnam, besides some niche markets in Australia itself.

And Elders, which in 2010 sold for Aus$165m its minority stake in Rural Bank, also announced the expansion of its remaining banking and insurance services.

The company said it was also to set up a foreign investment group "to capture international new business opportunities".

The plan was released after the close of trading on Sydney's stock exchange, where Elders shares closed down 2.2% at Aus$0.22.

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