Elders Stock Tumbles Following Earnings Alert

Highlights:

• Elders' stock dropped 24% following a forecasted decrease in full-year earnings, attributed to adverse weather, lower livestock prices, and reduced margins in agricultural chemicals.
• Revised earnings expectations now range between $120 million and $140 million for the year, down from previous years due to the impact of El Niño and market conditions.
• Despite early setbacks, Elders remains optimistic about the second half of the financial year, citing improved trading conditions and a positive outlook for the winter crop in several regions.

Unfavorable Weather and Market Conditions Hit Elders Hard

April 8, 2024 – Shares of Elders (ASX: ELD), a leading agribusiness group, witnessed a sharp decline of 24% to $7.44 today. The company attributed this significant drop to its disappointing first-half performance, which was adversely affected by challenging weather conditions, dipping livestock prices, and shrinking margins in the agricultural chemicals sector.

Earnings Forecast Adjusted

Elders revised its full-year earnings forecast, projecting an underlying EBIT (earnings before interest and taxes) ranging from $120 million to $140 million for the fiscal year ending September 30. This adjustment comes after the group posted an underlying EBIT of $171 million in 2023, marking a decrease from $232 million in the previous year.

El Niño's Impact and a Glimmer of Hope

The announcement highlighted the impact of the El Niño climate phenomenon, which led to drier conditions in eastern Australia, negatively affecting the agricultural sector. Elders pointed out that the subdued client sentiment, particularly evident in the first quarter, was a direct result of the Bureau of

Meteorology's declaration of El Niño.

However, Elders experienced a turnaround in January and February, with trading conditions and livestock prices improving, thanks in part to a forecast of a milder El Niño and better-than-expected cattle and sheep prices.

Looking Ahead

Despite the challenges faced in March, Elders remains optimistic about the second half of the financial year. The company anticipates that the dry and warm conditions in parts of Western Australia will push sales to the latter half of the year. Furthermore, Elders are encouraged by the improved outlook for the winter crop across most regions, buoyed by favorable soil moisture levels.

Elders also reassured investors of its commitment to achieving a cash conversion target of over 90% of its underlying net profit by the end of September. Nonetheless, due to the unsatisfactory performance in the first half, leverage is expected to exceed the company's target range for the 2024 fiscal year, with a return to the desired range anticipated in the first half of 2025.

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