Despite the drought, rural business seems to be ‘hot’ judging by the way Elders shares took off yesterday.They soared 15% after emerging from a trading halt having raised $100 million to fund its acquisition of wholesale buying group Australian Independent Rural Retailers (AIRR).
With Canadian group, Nutrien trying its own bit of rationalisation in the rural sector, (and running into problems with the ACCC), Elders has joined the party with a $157 million cash and shares offer for the unlisted private wholesale buying group Australian Independent Rural Retailers (AIRR).
Call it confidence or perhaps over-optimism but the decision by Elders to maintain interim dividend at 9 cents a share with the drought still biting hard in rural and regional Australia, was a gutsy call by the board and management.
The company’s trading update has underscored the sensitivity to adverse seasonal conditions and commodity prices. Morgans downgrades operating earnings forecast by -4.5%. As the stock is trading materially above long-term averages a severe reaction in the share price was not unexpected.