Bullish farm sector markets and hearty seasonal conditions have paved the way for a $68.2 million statutory profit after tax for Elders in the half year to March 31 - and the good times look set to keep rolling.
Not only are trading conditions looking robust, the historic agribusiness has also picked up about 900 new customers directly from its big rival, Nutrien, during the six month period.
The net profit grew 31 per cent on the $52m reported a year ago, while overall revenue broke the $1 billion mark, jumping 22pc to $1.1b.
Underlying earnings before interest and tax were up 40pc on a year ago to $73.8m.
The 182-year-old farm supplies and marketing company reported growth in almost all product and service fields and in all states, making the most of its corporate goal to generate good results in tough years and great results in good seasons.
Upbeat outlook
In fact, current seasonal conditions, including recently revived water storage levels in major eastern state irrigation areas, put agriculture in a solid position for the next 18 months or more according to managing director, Mark Allison.
"Soil moisture levels have greatly improved, and we're looking at good growing conditions for both winter and summer crops, while the herd rebuild and export demand continue driving a very strong cattle market story," he said.
"Of course, it may stop raining tomorrow, but I think the outlook is quite positive well into next year."
Even surging urban residential real estate demand has helped bolster Elders' balance sheet, with those earnings up 77 per cent, complementing robust rural property sales activity.
With Australian farmland continuing to attract strong overseas investment, Mr Allison noted how Canadian pension funds and northern hemisphere family wealth groups had stepped up to fill the gap left by Chinese buyers whose appetites had waned in recent years.
After emerging from widespread drought, farmer sentiment was upbeat, underpinned by strong livestock and property markets, which enabled Elders' real estate, financial services and rural agency businesses to enjoy solid growth results in the first half of 2020-21.
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Interestingly, however, while fortuitous weather and good commodity prices were healthy contributors to the result, Mr Allison said they only represented 35pc of the growth picture.
New acquisitions, including former Ruralco (Nutrien) farm services business YP Ag in South Australia, and five other new real estate and horticultural and general farm supplies ventures in NSW, Queensland, SA and Western Australia generated 21pc.
Elders also established six new greenfield sites in the past half.
Earnings aligned with internal integration and operational efficiencies represented a significant 44pc of the result.
AIRR overperforms
A sizable contributor to margin growth was the recently absorbed Australian Independent Rural Retailers business which was delivering "above pre-acquisition expectations", generating $29.3m in gross margin earnings, or almost double its results in 2019-20.
Elders was currently weighing up another 17 potential bolt-on acquisitions which Mr Allison said would possibly add five or six new business to the group before the end of the trading year.
In the longer term, the company has its eye on significant growth and market share target areas in most states, with rural product sales opportunities considered most notable in Queensland, WA, Victoria and NSW.
Agency growth ambitions will mostly target Queensland and Victoria, and a bigger real estate presence is on the drawing board in most state capitals and regional Victoria.
New customers
Mr Allison said with the dust still settling the Ruralco-Landmark merger 18 months ago Elders expected to gain more agency and farm products supply businesses, and customers, quitting the Nutrien ship.
In the first half of 2020-21 almost twice as many Nutrien customers had moved to Elders than were recruited throughout all 2019-20.
The only areas of the business under notable pressure at present of late have been the Killara Feedlot in northern NSW, which struggled to buy and feed stock at attractive margins because of soaring feeder cattle prices and Elders Fine Foods.
EFF, based in Shanghai, supplies meat cuts to top end restaurants and online customers but its current contribution to Elders' total revenue is less than any branch office in Australia
"It was breaking even, but Elders Fine Foods has been pretty badly squeezed by COVID conditions," Mr Allison said.
"Although it's not a core business for us, we want to get it in shape and making money again before taking any longer term decisions."
Weathering COVID challenges
Mr Allison said while the COVID-19 pandemic put some pressure on global fertiliser and chemical supply chains, Elders managed to avoid any material impact on its business performance and continued to organise early procurement of its farm supplies inventory.
Favourable rainfall events had set up a positive outlook for the winter crop and further strong demand for crop inputs, particularly fertiliser and crop protection products, in the second half of the year.
"We expect wool markets to remain volatile until containment or vaccination measures to control COVID-19 are in place and allowing supply and demand fundamentals to return," he said.
"Cattle prices should remain strong, although below the record highs seen recently, while sheep prices are expected to fall in the medium term as the global supply of red meat increases, although increased slaughter numbers should maintain earnings."
The favourable commodity price outlook combined with low interest rates and good seasonal conditions was tipped to maintain solid real estate demand for farmland.
Elders shareholders will receive a 20 cents a share first half dividend, which is 20pc franked, compared with last year's fully franked nine cents a year ago.
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