Ruralco Rides Out The Big Dry

By Glenn Dyer | More Articles by Glenn Dyer

Elders shares lost some of Monday’s gains yesterday which were made after what was an average full-year performance, while smaller rural rival Ruralco saw its shares add more than 7% in value yesterday after its September 30 figures came in a bit stronger than expected.

Elders shares leapt more than 19% by the close on Monday to $8.88 as investors applauded the 2017-18 figures which when stripped of one-offs, was average.

Elders saw a 38% slide in statutory profit of $71.6 million for the full year, which was ahead of analyst estimates. While the profit was lower than $116 million last year, the 2017 figure includes a $38.3 million reversal in brand name impairments.

Underlying profit of $63.7 million was up 9% or more than $5 million from 2017-18. And the fact that CEO Mark Allison talked confidently about how well the company was placed viz a viz the drought and how he saw opportunities to grow, saw the shares bound ahead to be the best performer on the ASX on Monday.

Tuesday brought an entirely different reaction and the shares crashed by more than 13% at one stage before steadying to end at $7.70, down $1.18 on the day.

Despite the drought, Ruralco shares had a different experience yesterday as the company produced figures showing it was riding out the drought and doing a bit better than expected.

It announced a 10% rise in post-tax profit to $28.8 million for the full year ending September 30.

The company will pay a fully franked dividend of 6 cents per share.

“The drought in many parts of the country this year has tested our strategy and reinforced the importance of building a diversified earnings base across our activities and geographies,” chief executive Travis Dillon said in yesterday’s statement.

Ruralco’s revenue in the 12 months to September 30 rose 5% to $1.913 billion, helped by stronger performances across the water trading and financial service divisions.

However, the drought kept the company’s real estate sector flat.

The live cattle export division was hit by excess capacity and the impact of drought on export-ready cattle supply and feed cost, with underlying earnings dropping $3.1 million.

Mr. Dillon said, while he was cautious of short-term seasonal conditions, he was optimistic due to recent spring rainfall, continued buoyancy in the sheep and wool markets, and stable cattle prices.

“The diversity of our activities and the geographic mix of our operations combined with a relentless focus on cost base efficiency will continue to soften the expected impact of any seasonal volatility,” he said.

Ruralco shares rose 7.2% to $3.17, which was a pretty good effort in yesterday’s 107 points, 1.9% slump in the ASX 200, which wiped more than $33 billion from the value of the index.

The company did not give specific guidance for its next results, but said it “remains cautious about short-term seasonal conditions, [but] recent spring rainfall, the continued buoyancy in the sheep and wool markets and current stable cattle prices supports the positive outlook for the business”.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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