17/05/2010 - 08:08

Elders banks on WA rain for improved H2

17/05/2010 - 08:08

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Elders has reported a $165 million first half loss, with improvement on its previous first half, and forecast continuing improvement in earnings in the second half if suitable rainfall levels are achieved in Western Australia.

Elders banks on WA rain for improved H2

Elders has reported a $165 million first half loss, with improvement on its previous first half, and forecast continuing improvement in earnings in the second half if suitable rainfall levels are achieved in Western Australia.

The rural services and automotive interiors provider on Monday said it saw an improved performance across its operations in the six months to March 31, and there was a "very real sense" its turnaround plans were gaining traction.

Elders' first half net loss compares to a $328.8 million loss in the previous corresponding period.

Included in the latest first half result is $167 million in non-recurring items, mainly related to asset reviews and writedowns in its forestry operations.

Underlying net profit, which excludes those impacts, was $1.1 million, up from a $21.8 million loss in the previous corresponding period.

Underlying earnings before interest and tax (EBIT) were $21.3 million, up from $1.6 million in the previous corresponding period.

No interim dividend will be paid.

The company said it anticipated further improvement in the second half of the financial year.

Season-breaking rain is yet to fall in Western Australia, but conditions elsewhere in Australia are "distinctly positive", the company said.

"Accordingly, the company anticipates a substantial lift in its earnings in the second half, given suitable rainfall in Western Australia and suitable market conditions," Elders said in a statement.

"This is expected to be sufficient to support the achievement of the prospectus forecasts... for underlying earnings and profit to shareholders."

The company said it saw a recovery in grower confidence and demand volumes in its rural services operations in the first half, but that was more than offset by lower prices for chemicals and fertilizer products.

Improvements on margins and a reduction in costs had allowed the rural services business to absorb the impact of those lower prices, Elders said.

Meat and livestock trading operations were impacted by reduced ship availability and the closure of the Indonesian market during the first half.

There was a rebound in income from this division in the second quarter and further improvement is forecast for the six months to September.

The forestry division saw a fall in earnings due to the asset writedowns, but underlying EBIT more than doubled from the previous corresponding period.

Elders said it expects woodfibre demand and sales for all regions other than its central Queensland and Esperance assets to remain strong.

"We look forward to growing cash flows from our forestry operations over the next five years as sales rise from the current level of approximately 400,000 tonnes per annum to over 2.5 million tonnes per annum," chief executive Malcolm Jackman said.

Automotive operations were a major contributor to the group's underlying EBIT growth in the period, as new contracts and higher income began to flow through following a severe downturn 18 months ago.

Refinancing and recapitalisation activities in the first half saw reductions in net debt in gearing.

Net debt stood at $378.7 million at March 31, down from $900.7 million at the beginning of the fiscal year.

Gearing was down to 36 per cent at March 31 from 128 per cent six months earlier.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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