Major acquisition for Elders amid ‘resilient’ financial year
Elders has announced a $475 million acquisition as its financial results show a major profits and earnings decrease.
National agriculture firm Elders, which is headquartered in Adelaide, recorded a 55 per cent decrease in statutory profits after tax in the financial year to $45.1 million, with a 25 per cent decrease to $128 million in underlying earnings before interest and tax (EBITS)
On top of 13 business acquisitions during the financial year, the company today announced it had entered an agreement to acquire 100 per cent of the shares in Delta Agribusiness for $475 million.
Delta provides products and advisory services around the country, with 68 locations and around 40 independent wholesale customers generating a revenue of $835 million in the 12 months to 30 June 2024.
Elders said the acquisition had “compelling strategic rationale”, with the ability to fill its retail gaps across New South Wales, North West Victoria, South Australia and Western Australia.
The company said incorporation of Delta could generate net EBITDA synergies of $12 million annually.
The acquisition will be funded through a pro-rata non-renounceable entitlement offer, a $110 million new revolving loan facility, and around $190 million of new Elders shares to be issued to Delta shareholders.
Elders managing director and CEO Mark Allison said the acquisition “continues Elders’ successful track record of growing our business through disciplined acquisitions”.
“Delta provides us with greater exposure to key local retail markets as well as a leading agronomy and farm advisory team,” he said.
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Delta managing director and co-founder Gerard Hines said there was a “strong cultural alignment” between the two companies.
“Our management team will remain unchanged and we are excited to be able to continue to provide our customers with innovative and value adding business solutions with the added support of Elders.”
The acquisition is expected to reach completion in the first half of 2025.
Elders made 13 acquisitions in the financial year. Photo: EldersThe announcement comes as Elders reported a drop across the board in its financial results, though it said the FY24 earnings were “resilient” following a 72 per cent drop in underlying profits and a 54 per cent slide in earnings during the six months to 31 March.
The company said improved trading in the second half had partially offset the first quarter’s negative earnings which were attributed to “low livestock prices, lower crop protection margin and subdued client sentiment”.
South Australian EBITS for FY24 made up 15 per cent of Elder’s total results at $26.7 million, a 27 per cent decrease from the previous year.
Elders attributed its South Australian earnings drop to “unfavourable seasonal conditions with limited rainfall adversely affecting Rural Products demand, coupled with ongoing margin pressure”.
Parts of South Australia have recorded the lowest August rainfall on record in 2024, with regional mayors calling for support amid a season that has gone “beyond repair”.
Despite record-low rainfall in parts of the country, Elders said it was “optimistic about the 2024 summer crop with favourable moisture profiles in many dry land areas, and average seasonal conditions across irrigated cropping regions”.
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Though the company expected to see price stability in livestock markets, it noted South Australia and Victoria’s dry conditions could impact volumes.
Amid a drop in revenue, Elders continued to focus on growth, with its 13 business acquisitions adding 263 full-time equivalent employees in FY24, as well as 21 new points of presence.
Allison said the company was “investing in projects of strategic significance”.
“Elders’ FY24 performance has reaffirmed for us the importance of commitment to a tightly managed cost base and a geographically diverse multi-product portfolio, to deliver strong earnings and value for shareholders through the cycles,” Allison said.
“The launch of Elders Wool is another key highlight for us. We officially launched Elders Wool in August 2024 at our world-first automated Ravenhall facility, with the opening marking the single largest investment in Australian wool handling this century.”
Elders State GM WA Matt Ericsson, Elders State Livestock and Wool Manager Dean Hubbard, Elders Wool Rockingham Operations Manager Ryan Fletcher, WA Minister for Agriculture Jackie Jarvis MLC, Elders GM Agency Dave Adamson and Elders EGM Rural Products Nick Fazekas, outside the Rockingham centre. Photo: EldersThe company recorded $3.1 billion in sales revenue throughout the period, a six per cent decrease, amid a 14 per cent rise in costs to $509.6 million.
It said prices for its retail products remained “historically low”, which the company said offset improved volumes sold across other categories.
Elders reported strong performance in its Real Estate Services, Elders Wool Handling investment and Elders Finance offering.
“Investing in the right initiatives and our people is a key focus to drive sustainable growth at Elders and will remain a focus in FY25,” Allison said.
“Cost control and reduction is a central focus that will allow us to maintain acceptable shareholder returns in challenging conditions and excellent shareholder returns in favourable conditions.
“A return to average seasonal conditions appears promising for FY25.”
The company recorded a final dividend of 18 cents per share, 70 per cent franked.
