Consumer Staples

Elders upgrades FY22 guidance: Leveraged to benefit from agriculture demand

Mon 23 May 22, 11:05am (AEST)
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Key Points

  • Elders experiences growth across all product areas amid strong demand for agriculture products
  • Cash flows were negative due to elevated inventory levels to meet anticipated customer demand
  • Elders said it expects 30-40% earnings growth in FY22

Elders (ASX: ELD) has delivered an unsurprisingly strong first-half FY22 result, given the commodity pricing and agriculture demand backdrop. The company's stock is up 9.1% ($14.94) in early trade.

Financials at a glance

  • Revenue of $1.51bn, up 38%

  • Net profit of $132.8m, up 80%

  • Earnings per share of 58.3 cents, up 36%

  • Dividend per share of 28 cents, up 40%

Favourable performance across all products

Elders experienced strong growth across all product areas and geographies. Notable segments include:

  • Retail products sales of $312.9m, up 47%

    • Strong demand for fertiliser and crop protection chemicals

    • Price inflation passed on to customers

  • Wholesale product sales of $46.7m, up 27%

    • Improved seasonal conditions

    • Strong demand amid supply chain concerns

2022-05-23 10 03 05-Window
Source: Elders Half Year Results Presentation

Inventory build

Elders hopes to mitigate supply chain challenges by holding higher inventory levels, acknowledging a potential margin squeeze if prices go south.

The inventory build was reflected by weaker cash flows, falling to -$35.1m compared to -$21.2m a year ago.

"Lower cash flow in the first half reflects that we have built an inventory position to allow us to meet anticipated increases in winter cropping demand," said CEO Mark Allison.

Outlook

"The strong first half performance has continued in April and we now expect to deliver full year 2022 Underlying EBIT in the range of 30% to 40% above full year 2021 Underlying EBIT," said Allison.

Positive drivers in the near-term include:

  • Elevated cattle and sheep prices benefiting the Agency business

  • Settlement volumes and buyer demand indicate that the Real Estate Services business "will continue to outperform"

  • Positive winter crop outlook expected to drive strong demand for second-half cropping inputs

2022-05-23 10 39 52-Window
Elders 12-month price chart

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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