Shares in Elders jumped 8% after the Australian agribusiness
icon trumpeted success in a drive to recover from one of its most difficult
periods in its 175-year history, unveiling a "solid turnaround in underlying
The feedlots-to-farm supplies group unveiled a loss of
Aus$10.2m for the six months to the end of March, a result it termed a "significant
improvement" on the Aus$303.2m a year before.
And it would have made a profit of Aus$6.7m were it not for
one-time effects, such as an operating loss at the forestry operations it is
quitting, compared with an underlying loss of Aus$23.7m a year before.
The result represents "an early milestone in the journey to
becoming a value-generating investment for its shareholders", said Mark
Allison, who became permanent Elders chief executive at the start of this
month, moving from the role of chairman.
Mr Allison took the helm on an interim basis after the sudden
departure of Malcolm Jackman in November.
Mr Allison said: "We've moved from incurring underlying
losses to generating underlying profit and it is pleasing that every part of
the business delivered improved results – in spite of variable seasonal
conditions which included drought in much of north eastern Australia"
The result was well received by investors, who sent Elders
shares up 8.7% to Aus$0.125, although this remains well below levels above
Aus$28 reached in 2007, when agriculture was a fashionable investment bet, and
before the group began to crumple under the weight of its debts.
The group had Aus$1.4bn in debt when Mr Jackman arrived six
years ago, and has run up losses totalling Aus$1.6bn in five years as it retrenched
back to its core agricultural operations in a bid to restore its fortunes.
The revival plan has involved selling out of a range of
operations, including banking, a grain trading tie-up with German-based Toepfer
and its forestry businesses, and at one point looked like bringing a sale of the
brand itself through an auction process.
Although rival RuralCo bid for Elders, its offer was rejected
as too low. RuralCo, which on Tuesday reports its own first half results, has built a stake of 11.9% in Elders, and remains the largest shareholder.
Elders said that its improved profitability, despite a drop
of 6.3% to Aus$650.4m in revenues, had been led by a cut of some Aus$15.0 in sales
and administration costs.
However, it also highlighted its traditional agency
business, in both farmland and livestock, as making "the greatest contribution
to the lift in gross margin", raising profitability by Aus$6.1m .
The live cattle export business raised margin by Aus$4.4m.
Mr Allison added that the outlook for Elders was "positive",
raising the prospect of further "improvement again last year's results".
"Recent rainfall has provided a good start to the winter
"Currently, cattle prices are recovering, sheep prices are
strong and feedlot and live export demand continues to be healthy."