Live Export

Elders to depart live export trade

James Nason, 12/09/2016

elders-signThe squeeze on live exporter profitability has claimed a high profile casualty with Elders announcing its decision to depart the trade today.

Cattle and sheep exports have been an integral part of Elders’ business for many years.

Elders’ short-haul business, North Australia Cattle Company, which ships live feeder and slaughter cattle to Indonesia, Vietnam and Malaysia, is one of Australia’s largest livestock exporting companies.

However, in a decision symbolic of the financial challenges facing live export businesses in the high cattle purchase price/low sell price cycle, Elders announced this morning that it will shut down its long-haul live export business immediately, and will put its NACC business up for sale.

Elders told Beef Central this morning the decision means that the GM Live Export role is no longer required moving forward, and as a result its head of live exports, former Livecorp CEO Cameron Hall, will be leaving the business this week.

The decision reflects a significant turnaround in Elders’ position on live exports in the past year.

In recent years the company has spoken of its intention to invest heavily in more downstream infrastructure to support its live export operations, such as more feedlots in Vietnam and China, to complement its Indonesian feedlot and abattoir infrastructure.

The NACC team was last year recognised by Elders with its “Team of the Year award” for its success in loading more than 40 shipments and 120,000 head of cattle in Darwin, Townsville and Wyndham during 2015.

Elders also became the first Australian exporter to put slaughter cattle into China under the new protocol via an air-freight consignment in October last year.

The future of Elders International’s existing feedlot and abattoir in Indonesia, until recently run by well-known live export industry identity Dick Slaney, is not currently clear.

Elders told the ASX this morning it had undertaken a full review of its live export business and has determined to “immediately exit the long haul live export business and to conduct a managed divestment as a going concern of the businesses of short haul and air freight of live animals.”

Poor margins and capital inefficiency in the long haul business warranted an immediate cessation of that business, it said.

“Elders has determined that its participation in live export no longer lies in the logistics of shipping live animals,” the statement explained.

“Rather, Elders’ strategic and operational strengths in the live export supply chain are in finding opportunities with live exporters for its producer clients and accumulation of cattle for exporters.

“At present the majority of Elders’ long haul business comprises sea shipments of dairy and beef breeder cattle to China.

“That business is not producing a return on capital or margins at levels that meets Elders’, or its shareholders’, expectations.”

Elders said the live export business has matured and there are now many specialist operators offering access to Asian markets.

“While we continue to support our clients who participate in the live export industry, the export, logistics and shipping of live cattle to long haul destinations is no longer central to Elders’ strategy which was devised when demand for live cattle from foreign markets was key to providing marketing options for Elders’ livestock producer clients,” Elders CEO Mark Allison said.

“With the introduction of additional specialist providers of live export services, with many of whom Elders has established commercial relationships, the strategic rationale for Elders conducting its own long haul live export business has diminished.”

“Elders reported a loss of $2.9m from its Live Export businesses in the 6 months to 30 March 2016. That poor result included a loss of $3.8m attributable to the long haul business. Since that report, performance in the long haul business has continued to be poor and we believe that margins are unlikely to recover in the near to medium term”, Mr Allison said.

“In addition, we do not see that the China feeder and slaughter trade, which is yet to fully open, will deliver margins or a return on capital at levels that meets our, and our shareholders’, expectations.

“As a result, we consider that the long haul of live cattle is best suited to specialist logistics operators.”

Mr Allison said the review has also concluded, on the other hand, that Elders’ short haul sea export of feeder and slaughter cattle to Indonesia, Vietnam and Malaysia had remained viable, notwithstanding extremely high Australian cattle prices which has placed pressure on margins.

“Accordingly, Elders has determined it will continue to conduct that business while preparing it for sale.”

“We enjoy very good relationships with end user customers in our short haul business. Those relationships have ensured that business has remained viable even in an environment of constrained margins.”

“Elders remains absolutely committed to the needs of its livestock producer clients and will continue to offer access to a range of marketing options, including sale to live exporters, for their cattle. We will continue to work with industry live exporters to market our clients’ cattle” he said.

Elders will publish its full year results on November 14. The statement said the full year trading loss from the Live Export business is likely to be in the range of $8-9m.

“In connection with the decision to exit Live Export, Elders will incur restructuring and exit costs totalling approximately $6m. These costs will also be treated as non-underlying in the results for the 12 months to 30 September 2016.”

“After adjusting for the non-recurring restructuring and exit costs and the losses incurred in the Live Export segment, Elders expects an underlying Earnings Before Interest and Tax (EBIT) for the full year to 30 September 2016 in the range of $54-57m.

“This result reflects better than average retail activity due to seasonal conditions, strong livestock prices driving the agency result and solid progress against Eight Point Plan objectives. Conversely, high cattle prices have impacted margins in the Feed and Processing businesses.

“Elders has provided a ranged guidance due to the impact of timing of spring sheep volumes and post emergent herbicide activity across the southern regions of Australia on the September month result.”

“Upon finalisation of the Live Export exit, Elders’ will have circa $25m of working capital which can be redeployed in areas that meet our return on capital expectations.”

Possible buyers for the NACC business could include foreign interests, with members of the trade telling Beef Central in recent weeks that Chinese Government owned companies have been actively showing an interest in entering the Australian live export market.




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  1. J Chris Hughes, 12/09/2016

    As a former GM of Elders Livestock Exports it would seem a pity to see the Big E out of the trade, in particular Cameron Hall a very highly respected executive. Elders originally used its live export capabilities to support its agency business and vice versa which provided both vertical and horizontal integration; it also provided a good training base for new entrants into the trade and helped establish the standards for the export of Australian livestock which are the ‘world’s best’ today. But I suppose everything must change so vale Big E Livestock Exports and NACC…

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