Early on Monday, diverse billion-dollar Australian corporation Elders [ASX:ELD] shared its half-year results for FY2023. It reported $82.8 million in underlying earnings before interest and tax (EBIT) and announced the decision to pay out a dividend of 23 cents a share, 20% franked.
The group’s net profit was also down by 46.5% to $48.8 million, and the group also brought down its guidance compared with last year.
As a result, the ELD share price was falling by more than 10% by the early afternoon.
Worth $7.45 a share at the time of writing, ELD is down 10% in the month — 47% in the last 12 months — and has dropped further in both its sector and on the ASX 200 benchmark:
Source: TradingView
Elders’ first six months of FY2023 revealed
Diverse corporation Elders has released its half-year results for the six months to 31 March 2023. It warned of a volatile industry backdrop impacted by softened livestock trading conditions, weaker prices, and unseasonably wet weather.
This was said to have been a big contrast with the stronger trading conditions experienced last year. This also showed in the real estate market before interest rates and inflation took hold of consumer sentiment and crushed cost-of-living and housing expectations.
The half-year continued in a similar trajectory as seen in Q4 2022, with the industry reverting to a more normalised trading environment.
Elders reported statutory net profit after tax (NPAT) of $48.8 million, down by 46.5% on the prior corresponding period, the same time last year.
Underlying EBIT of $82.8 million was also down, this time by 37.7% on last year, but up by 12.2% on the same time in FY2021.
Portfolio return on capital (ROC) for the half year was 16.9% — 1.9% above the 15% benchmark set in its ‘Eight Point Plan’ strategy.
The group commented that this result was impacted by higher working capital build with the anticipation of a strong winter crop and was said to have accelerated the recovery of supply chain lead times.
Agency services experienced a 22.1% decline in earnings. However, the group noted resilience in real estate and increased demand for insurance products, with rising premiums boosting its financial services segment.
Considering the challenging conditions and lower trading results, Elders directors determined to pay a dividend of 23 cents per share, 30% franked.
This is down by 18% on the 28 cents a share dividend that was declared last year.
Elders also said that it now expects its FY23 underlying EBIT to reach between $180 million and $200 million, the midpoint of which is 18.1% lower than FY22.
CEO Mark Allison stated:
‘The half-year financial results have been satisfactory given the market and seasonal conditions, especially in the flood impacted Q1. Elders continues to execute its plan to deliver growth through the cycles.
‘The freeing up of supply chains, lower freight costs and more sustainable fertiliser prices are a great benefit to the agricultural industry but make the comparison between HY23 and HY22 challenging.
‘Consequently, Elders has taken the decision to provide full-year guidance to reinforce our expectation that second-half earnings are likely to exceed the first half, a more typical earnings profile for Elders.’
Mr Allison attributed higher costs to the significant strategic investments in business transformation and growth initiatives to deliver on growth beyond the third Eight Point Plan.
Elders anticipates improved conditions across its divisions in the second half of FY23, including in the real estate sector as ‘softer broadacre market conditions’ are expected to persist.
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Regards,
Mahlia Stewart,
For Money Morning
