Rural services offers silver lining in Elders’ end of year result

Beef Central, 14/11/2011

Elders has reported a $395 million loss for the 2010-11 year, but the result has masked a positive turnaround in its core rural services business.

In a statement issued to the ASX this morning, Elders said the loss was primarily due to its decision to withdraw from the forestry sector as well as other unprofitable or non-core operations.

However underlying earnings before interest and tax (EBIT) improved substantially by the company's network operations, despite the financial impact of the live exort ban.

"After a difficult start to the year, seasonal conditions have been positive, and we are starting to see the benefits of the investment made in business transformation over the past three years as the business has clearly turned around” managing director Malcolm Jackman said.

“Rural Services has increased its underlying EBIT contribution from $0.5 million to $25 million and the Australian network operations has lifted its EBIT contribution by 92pc, despite extreme weather conditions earlier in the year and a sharp reduction in live export income due to the Indonesian shut down in June,” Malcolm Jackman said.

Key points of today's result included:
  • The company's underlying profit, calculated after exclusion of the non-recurring items was a profit after tax of $4.7 million, up from a loss of $15.1 million in the previous year.   
  • A 21pc reduction in debt levels since the beginning of the year. 
  • Further cuts to debt are expected as the proceeds of forestry divestment are applied to debt reduction.

Mr Jackman said that while it was disappointing to record another statutory loss, the 2011 results clearly highlight three key positive takeaways.

“Firstly, Rural Services is a growing, profitable and cash-generating business and considering we’ve experienced cyclones, floods and live export shutdowns, the business has performed creditably,” Mr Jackman said.

“Secondly, a number of our unprofitable, cash-consuming operations have now been divested and there is a major and progressing divestment program designed to achieve a complete exit from forestry,” he said.

“Thirdly, while interest expense consumed most of our earnings in 2011, the forestry asset divestment program will lead to reduced debt, better cash flow and significantly lower interest expense.

“The end result is that Elders will be a company with substantially lower debt and focused on its profitable, cash-generating and growing businesses in Rural Services and Automotive,” he said.

Elders' share price closed at 24c yesterday, down 5.88pc on its previous close on Friday.




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