Elders shares jump as it hits revival 'milestone'

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 profit".

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"

Long turnaround

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.

'Positive outlook'

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 cropping season.

"Currently, cattle prices are recovering, sheep prices are strong and feedlot and live export demand continues to be healthy."

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