DESPITE ongoing drought conditions across the country, Elders has reported underlying earnings of $73.7 million, before tax and interest - just shy of its 2018 results - and a return on capital of 18.2 per cent at the company's annual general meeting in Adelaide today.
Elders chief executive officer Mark Allison said it was a "creditable performance" given the challenges faced by rural businesses in many parts of Australia, attributed to diversification in the business.
"In our 180th year, we are continuing to pursue our philosophy of maintaining a cost and capital position that allows us to deliver good returns in bad seasons and excellent returns in good seasons," he said.
"It has been the most difficult year for our customers, particularly in the eastern states, who have been coping with floods, drought and bushfires.
"The focus of our Eight Point Plan over the past five years has driven increased diversification right across our business, by product, service, business model, crop segment and geographical exposure.
"This diversification has been underpinned by strong financial discipline and focus.
"Against the backdrop of challenging conditions in many regional areas, we have delivered a net profit after tax equivalent to last year's profit, which was in itself a record profit in the years since we returned to become a pure-play agribusiness."
The company reported an underlying after-tax profit of $63.6m, also in line with the previous year, while the $73.7m underlying earnings, before interest and tax, was $0.8m lower than 2018.
Mr Allison was delighted to tell shareholders that they would receive a fully-franked 9 cent dividend tomorrow, increasing dividends to 18c a share for the full year - also on par with the 2018 financial year.
"The results highlight the resilience of our business model and reaffirms that our target of seeking 5-10pc EBIT growth through the FY17 to FY20 agricultural cycle is both realistic and achievable," he said.
"At 18.2pc, underlying return on capital approached our 20pc target, with unfavourable seasonal conditions resulting in lower wool volumes and reduce summer cropping, and the increased capital associated with acquisition activity, including the TitanAg and Livestock in Transit businesses."
Mr Allison said margins in the company's rural products business were $6m lower due to reduced summer cropping, with agency services' margins down $5.2m, impacted by lower wool bales sold across all geographies, in line with the overall fall in the market.
"Offsetting that was $10.2m in underlying profit largely due to the contribution of recent acquisitions, including Titan Ag and Livestock in Transit businesses," he said.
Elders' real estate business also had a reasonably good year with higher activity in both broadacre and rural residential sales, he said.
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Mr Allison recognised conditions had been tough and said Elders' team, of about 1900 "pink shirts", would stand by its customers.
"We understand the importance of keeping regional communities in tact," he said.
"In some of areas, our branches are not profitable, but we will not close branches because of seasonal impacts, we just won't do it.
"We will absorb those losses because we are confident those communities will not only recover, but they will prosper again one day.
"Instead we have encouraged our staff to look after our clients, talk to them and see what we can do for communities.
"Elders has been around for 180 years, we play the long game, we have multi-generational customers and we are committed to them."
Mr Allison said in the coming year, the company expected to see a significant earnings contribution from its acquisition of wholesale business Australian Independent Rural Retailers.
"This has been a transformative step in the growth of Elders," he said.
"AIRR provides us with a large wholesale business with a proven history of growth and enhancing our logistics and distribution coverage.
"Independent retailers are very important to regional communities, and AIRR give us an immediate access to that sector, as well as the hobby farm and produce sector.
"AIRR's geographical reach also positions us well to take advantage of further industry consolidation, including an expected rationalisation of branches and people by our competitors in many areas."
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