The Elders Ltd (ASX: ELD) share price surged to a 10-year high this morning after the group posted a big rise in profits.

The rural products and services group jumped 5.1% to $9.89 in morning trade when the S&P/ASX 200 Index (Index:^AXJO) lifted 1.2%.

Favourable weather and soft commodity prices pushed the group’s first half statutory net profit up 90% to $52 million, while the underlying number improved by 68% to $47.6 million.

It’s raining profits

Underlying earnings is the figure more investors watch as it’s a better reflection of operating performance. The positive result was credited to a solid performance from Rural Products with gross margin boosted by recent winter crop confidence.

High prices for both cattle and sheep and steady earnings in Real Estate and Financial Services also helped.

The good earnings news comes even as the group was hit by the COVID-19 pandemic and devastating bushfires over the Christmas and New Year break.

Rain drowns COVID-19 fears

But these headwinds weren’t enough to dampen the impact of much needed rain. While we can’t say the drought that gripped many parts of the country is breaking, there are early signs that the worst is over.

“Successive rainfall events across major cropping areas on the East Coast have had a positive impact on operational performance within the last period, lifting farmer confidence and driving strong demand for crop inputs,” said Elders’ chief executive Mark Allison.

“This has contributed to a significant uplift in Rural Products, given the 66% decline in summer cropping.

“The growth in Rural Products margin has been lifted with the addition of AIRR to our Wholesale Network.”

The turn in the weather is also giving other agri-related stocks a boost. This includes the Graincorp Ltd (ASX: GNC) share price, Nufarm Limited (ASX: NUF) share price and Costa Group Holdings Ltd (ASX: CGC) share price.

Clearer skies ahead?

The outlook provided by Elders gives investors another reason to celebrate. While it admitted that it couldn’t reasonably estimate the financial impact from the coronavirus fallout, it believes it can deliver a full year result that’s in line with consensus estimates.

Management is tipping earnings before interest and tax (EBIT) to range between $96.5 million and $112.9 million. Net profit is expected to be $85.8million to $102.9 million.

Chinese wildcard

However, escalating tension between China and Australia could pour cold water on the group even though it isn’t yet a feature on group results.

In fact, management said wool export to China “is operationally sound” while demand from Europe and the US have been impacted by the looming recession.

But if China extends tariffs and other trade restrictions on our exports to punish Australia for calling for an independent investigation on the coronavirus origins, things can turn sour for the sector.

More reading

• These 5 ASX shares were last week’s biggest gainers
• 3 ASX 200 shares to watch this week
• How to invest $5,000 in ASX 200 healthcare shares today
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• 5 ASX 200 winners and 5 losers of the week

Motley Fool contributor Brendon Lau owns shares of Nufarm Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Elders Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) edged higher last week as coronavirus restrictions began to ease. The market was led by the miners which offset falls in other sectors, leading the ASX 200 up 0.25% higher over the week. 

It’s now been 8 weeks since the market bottomed in March. Since then, the ASX 200 has risen 18% but remains 24% down from its February high (at the time of writing). Tension between a potential quick recovery and uncertain outlook for corporate earnings means the ASX 200 has remained relatively unchanged over the past month. 

Both the GFC and dotcom crash saw multiple bear market rallies. The coronavirus crisis has only provoked one bounce so far, despite being a more significant economic shock. Higher commodity prices saw miners lead last week’s gains, with iron ore prices seeing a sustained rise since the start of the month as Chinese production resumes. 

Pilbara Minerals Ltd (ASX: PLS)

Pilbara Minerals led the gainers last week with a 19.5% share price rise. Shares in the lithium miner closed last week at 24.5 cents. Lithium prices plummeted last year, which saw shares in Pilbara Minerals decline throughout the year from a high of $1.18 in 2018. 

Lithium is an integral component of batteries for electric vehicles. As electric vehicle purchases have risen, so has the demand for batteries, fuelling lithium demand. New mines and increased production brought a glut of lithium to the market hammering prices last year. Supply is expected to grow threefold by 2025. 

Despite this, some predict that as momentum builds demand could outstrip supply. According to some forecasts for electric vehicle penetration, lithium demand is set to increase 10-fold over the next decade. Pilbara Minerals has a multi-stage expansion program planned to unlock deposits at its Pilgangoora Project.

The company is currently moderating production in response to soft market conditions. Resumption of economic activity in China and an extension of China’s electric vehicle subsidy program are expected to boost the lithium-ion battery sector and improve market conditions in the medium to long term. 

Southern Cross Media Group Ltd (ASX: SXL) 

Shares in Southern Cross Media Group gained 18.5% last week to finish the week at 16 cents. While Southern Cross Media shares were among the best performers last week, they have been among the worst over the past year – Southern Cross shares are currently down 80% on a year ago. The broadcaster has suffered over the past year as advertising markets took a turn for the worse. 

Southern Cross Media reported a 10% decline in advertising revenue for the 9 months to 31 March. Q4 FY20 and Q1FY21 advertising revenues are expected to be materially impacted by COVID-19 and be down 30% or more on prior corresponding periods. But with the major fall in the share price some are speculating Southern Cross Media is undervalued, arguing it will be well-placed to benefit when advertising markets recover.

The broadcaster recently undertook a $169 million equity raising using proceeds to pay down debt. Net debt was $161.8 million at 4 May including all proceeds of the equity raising. Southern Cross has estimated that bad and doubtful debt provisions for H2FY20 could reach $5 million. 

Positive earnings were recorded in April with revenue declines partially offset by operating cost reductions. The broadcaster is eligible for the JobKeeper Allowance for approximately 1,750 employees – this subsidy has been included in operating cost reductions for April. As a result, the broadcaster broke even in April on an earnings before interest, tax, depreciation and amortisation (EBITDA) less capex basis. 

Resolute Mining Limited (ASX: RSG)

Resolute Mining Group Limited shares closed last week up 14.2% at $1.085. The safe haven gold miner benefitted from an increase in the gold price last week which moved above $2,700 an ounce. Resolute operates mines in Mali and Senegal. 

In 2020, Resolute has provided production guidance of 430,000 ounces of gold at an all-in sustaining cost (AISC) of US$980 an ounce. In the March quarter 100,763 ounces of gold were poured at an AISC of US$1,007 an ounce. 

In March, Resolute announced the sale of its Ravenswood mine in Queensland. The company received $100 million upfront for the sale consisting of $50 million in cash and $50 million in promissory notes which earn a 6% coupon. There is potential for up to $200 million in additional payments, which depend on the average gold price and investment outcomes of Ravenswood. 

In the announcement, CEO John Welborn said the sale maximises value for shareholders and “enables us to focus our attention and energy on our African portfolio and the abundant opportunities for further growth and value creation.” 

Saracen Minerals Holding Limited (ASX: SAR)

Shares in Saracen Minerals Holdings gained 13.2% over the course of last week to finish the week at $5.05. Saracen was another gold miner that benefitted from the rising gold price and move to safe haven assets. 

In the March quarter, Saracen produced 158,133 ounces of gold at an AISC of $1,133 an ounce. Coronavirus had a minimal impact on March quarter production. Although it is unclear whether there will be an impacts in the June quarter, Saracen has maintained its FY20 guidance of 500,000 ounces of gold. 

In the 9 months to 31 March 2020 Saracen produced 374,684 ounces of gold at an AISC of $1,081 an ounce. The company has large ore stockpiles exceeding 1.7Moz, which will help insulate the business should mining be restricted by COVID-19 impacts. 

St Barbara Ltd (ASX: SBM)

St Barbara shares gained 11.9% last week to close the week at $2.92. Another gold miner on the list, St Barbara has assets in Western Australia, Papua New Guinea, and Canada. 

In the March quarter, St Barbara produced 92,000 ounces of gold at an AISC of $1,405 an ounce. The miner sold 99,000 ounces of gold at a realised gold price of $2,123 an ounce. 

In the financial year to date, St Barbara has produced 273,000 ounces of gold at an AISC of $1,396 an ounce, and sold 277,000 ounces of gold at a realised gold price of $2,015 an ounce. 

More reading

• Meet the ASX 200 company that just posted a 90% surge in profit
• 3 ASX 200 shares to watch this week
• How to invest $5,000 in ASX 200 healthcare shares today
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• 5 ASX 200 winners and 5 losers of the week

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It was another good week for ASX 200 shares as the S&P/ASX 200 Index (ASX: XJO) edged 0.25% higher. 

Last week I was watching Commonwealth Bank of Australia (ASX: CBA), Flight Centre Travel Group Ltd (ASX: FLT) and Xero Limited (ASX: XRO).

The CBA share price edged lower but is still hovering around the $60 per share mark. Flight Centre shares fell 7.06% lower last week as investors continued to contemplate whether the minimal easing of coronavirus restrictions will translate positively for the travel sector. Xero shares slumped 8.48% lower, including a 5.58% drop on Friday, after the release of its full-year earnings on Thursday. 

As we commence another COVID-19-hit week on the markets, check out the 3 ASX 200 shares I’ll be keeping an eye on. 

3 ASX 200 shares to watch this week

I think the Northern Star Resources Ltd (ASX: NST) share price is one to watch this week. Northern Star is one of the leading ASX 200 gold shares and could climb higher if investors continue to be bearish.

Given the uncertainty we’re seeing in the economy, I think gold shares could do well this week. I’m not bullish enough to be buying gold shares for the long-term, but the Northern Star share price could be an indicator of how investors are feeling right now.

Woodside Petroleum Limited (ASX: WPL) is another ASX 200 share to watch this week. Towards the end of last week, there was a lot of oil-driven volatility. The US markets (which the ASX often follows) were up and down as the oil price war continues. Despite low demand and a glut of supply, Woodside shares could be in the buy zone.

No one knows how the Saudi Arabia-Russia oil war will play out this year. However, Woodside shares are down 38.76% this year and could bounce back strongly if we see signs of a return to normality in the weeks ahead.

Finally, Wesfarmers Ltd (ASX: WES) is among my ASX 200 shares to watch this week. Wesfarmers is sitting on a big pile of cash right now and it could be ready to deploy it. Whether this is via a strategic acquisition or in a new industry altogether, I think Wesfarmers could soon be going shopping.

This could put the ASX 200 conglomerate’s shares in the buy zone if it picks up a high-quality company for a cheap price.

More reading

• Meet the ASX 200 company that just posted a 90% surge in profit
• These 5 ASX shares were last week’s biggest gainers
• How to invest $5,000 in ASX 200 healthcare shares today
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• Why I think it’s time to buy this ASX 200 share

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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