AGRIBUSINESS Elders Limited has downgraded its earnings estimates for the financial year ending 30 September due to lower rural product sales, livestock prices and sale volumes, and increased gross margin pressure on crop protection products.
Elders told the Australian Stock Exchange this morning that underlying earnings before income tax is now expected to be between $165 million and $175 million, down from the previous guidance range of $180 million to $200 million.
Notwithstanding this revision, target cash conversion of greater than 90 percent of underlying NPAT as at 30 September 2023 is expected to be achieved, Elders said.
The update followed a review of the July year-to-date financial results and month to date August trading that indicated lower than forecast rural products sales in recent weeks; greater than forecast pressure on rural product gross margin especially in crop protection products, and; further weakness in the prices of cattle and sheep with a lower than forecast offset from volumes traded.
Elders said it is experiencing cautious customer sentiment in light of uncertain seasonal conditions in some farming regions, compared to forecast assumptions.
This uncertainty is now supported by the Bureau of Meteorology’s long-range forecast for September to November that predicts a heightened probability of warmer and drier than average conditions in eastern and western parts of Australia and risk of an El Nino declaration.
As indicated in Elders’ previous guidance, the updated range announced today continues to be subject to variables outside of Elders’ control that have the potential to materially influence Elders’ financial outcomes, or the timing of those financial outcomes, the company said.
These include further values and volume changes in internationally traded livestock and fibre; unexpected and unforecast changes in commodity prices; unexpected and unforecast changes to seasonal conditions and severe weather events; potential of supply chain disruptions as a result of external events, including geopolitical events, and; the outlook and prospect of the Australian farm sector generally.
Source – Elders
Geez sounds like the old chestnut of weather markets etc is getting another run. Good competent management should be able to mitigate and navigate these circumstances as guess what it’s agriculture hope management will take a pay reduction commensurate with withering share price/profit results just as the broader farming industry does !
Interesting spin..
A few years ago the solid profits was put down to great management with no mention of the external factors driving the results including a few years of great seasons.
Now that a dry year looms and the livestock market is tough, she is all due to external factors.