The Elders Ltd (ASX: ELD) share price is in the red today. The agribusiness comes into focus after releasing its half-year results for the six months to 31 March 2021.
At the time of writing, shares in the company are trading for $11.87 – down 2.95%. By comparison, the S&P/ASX 200 Index is 0.54% higher.
Let’s take a closer look at the results and what they mean for the Elders share price.
Elders half-year results
In today’s release, Elders reports underlying profit after tax is up 31% on the prior corresponding period (pcp) to $68.2 million. Total sales for the six-month period are $1.1 billion, which is 22% higher than the first half of FY20.
Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased 28% to equal $94.3 million. Underlying earnings per share (EPS) are up 38% on the pcp to 42.9 cents. The company will pay a 20-cent interim dividend per share to shareholders, 20% franked. In the first half of FY20, the company paid a 9-cent dividend, fully franked.
The biggest drivers of the growing profit were an $18 million increase in the margin of retail products and $11.9 million for wholesale products. Costs were up $16.5 million on the pcp. Elders attributed this to “acquisitions, higher insurance costs, investment in strategic areas and systems modernisation expenses”.
Despite these positive figures, the Elders share price is heading south today.
In a separate statement to the ASX, Elders said the results were due to a variety of factors, including a backward integration strategy that boosted retail sales, encouraging weather conditions (which it expects to continue in the short term), and favourable commodity prices.
The Australian Bureau of Statistics (ABS) supports this view of favourable growing conditions when compared to the previous financial year.
In FY20, the total value of crops produced decreased by 5% compared to the previous year. This was driven largely by a 20% drop in the value of wheat production and a 78% fall in the value of cotton production. Operating cash flow was down 13% on the pcp to $23.9 million. Total cash flow for the period was a $21.2 million outflow. In the pcp, it was a total inflow of $55.4 million. Elders says the drop in operating cash flow is due to increased working capital in rural production. Financing cash flows fell 115% into the red (-$19.8 billion) to drive the total cash flow loss.
Elders share price snapshot
Over the past 12 months, the Elders share price has increased 23.7%. Only last week, Goldman Sachs put a buy-rating on Elders shares, with a target price of $15.00.
Elders has a market capitalisation of $1.8 billion.
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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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