Elders (ASX:ELD) shares slumped more than 14% to a new 52-week low at one stage on Monday after it revealed it had cut its half-year dividend 18% to 23 cents from 28 cents per share in the wake of a 46% slide in interim earnings.
Directors said the company was impacted by the lingering end to the La Nina wet as well as the volatility in commodity markets sparked by the Russian invasion of Ukraine.
That saw the shares hit a low of $7.08 in early trading on Monday and then edge higher to close at $7.20, still down more than 13% on the shock profit slide and dividend cut.
The company said earnings for the six months nearly halved to just over $48 million from $91 million a year ago.
That was despite a 9% rise in half year revenues to $1.66 billion.
And it forecast a full year result that would be well under 2021-22’s result.
Directors downgraded earnings before interest and tax (EBIT) to a range between $$180 million and $A200 million. They said “the midpoint of which is 18.1% lower than FY22’s (profit) but up 13.8% on FY21.”
They said the second half performance would be “supported by strong demand for agricultural commodities.”
The company said the first half fall in earnings occurred against a “volatile agricultural industry backdrop, impacted by softened livestock trading conditions, weaker crop input prices and unseasonably wet weather.”
“This contrasts with the exceptionally favourable HY22 trading conditions which saw firmer livestock prices, a strong real estate market and ahead-of-season client procurement for winter crop, in response to the global supply chain uncertainty at that time. HY23 continued the similar trajectory seen in 4Q22 with the industry reverting to a more normalised trading environment.
Underlying EBIT of $82.8 million was down 37.7% on the first half of 2021-22 but up 12.2% on HY21.
“This result was impacted by higher working capital build in anticipation of a strong winter crop and accelerated recovery of supply chain lead time.
Directors said the outlook for rural products in the second half “is encouraging with sowing now under way supported by generally favourable soil moisture profiles and neutral climactic conditions.”
“The outlook for agency services is forecast to improve in the second half but overall remain below FY22 levels. Cattle prices are expected to remain subdued on volume growth, supported by the recent improvement in United States beef import prices. Lamb prices are expected to remain under pressure given mixed quality and higher volumes, while mutton prices have shown signs of improvement. The wool market is expected to remain robust.
“In real estate, softer broadacre market conditions are expected to persist for the foreseeable future, with residential remaining robust despite elevated interest rates and inflation. Property management is expected to remain strong, supported by the acquisition of six offices in NSW.”
And the said the strong performance of the Financial Services business is expected to continue into the second half of FY23.
CEO Mark Allison said in Monday’s release that the “demand for food and fibre remains strong globally and Elders’ long-term earning potential persists with equal strength.
“We remain confident in the strategic foundations and principles set for Elders under its Eight Point Plan and its ability to deliver expected earnings and shareholder value at full year.”