The chief executive of agribusiness and pastoral group Elders...

The chief executive of agribusiness and pastoral group Elders says a share price drop of 23 per cent that wiped $475 million from the group’s value on the announcement of his departure next year is a “gross overreaction” and he does not take it as a compliment.

Mark Allison said while some of his friends have told him to view the share price tumble a month ago as a compliment on his own standing with investors and performance after eight years at the helm, he doesn’t see it that way.

“Five per cent is a compliment,” he said. Mr Allison said the 20 per cent-plus slide was an overreaction.

“I think it’s a gross overreaction. I think it reflects less on me and more on the market not liking uncertainty.”

Elders chief executive Mark Allison.

Mr Allison also said Elders was content to just sit on its newly acquired 11.3 per cent stake in New Zealand farm supplies company PGG Wrightson. Elders paid $35 million for the stake on December 14, picking up the parcel from a Chinese shareholder. “We’re sitting there, we’ll monitor how it goes. It’s a low pulse rate move.”
It is a back-to-the-future moment for Elders because it did due diligence on PGG Wrightson in 2018 when it was considering a full takeover of the NZ company, which at that point also included a large seeds division. But a Danish company, DLF, came in with a much higher offer for the seeds business alone, so Elders bowed out.

“We thought we’d wait,” Mr Allison said on Thursday, at the conclusion of the group’s annual meeting.

Elders lost $475 million in sharemarket value on November 14 when it announced Mr Allison would leave towards the end of calendar 2023. He took the role in 2014 under controversial circumstances, shifting from chairman to running the day-to-day operations.

He engineered a strong turnaround at a company that almost went bust after the global financial crisis, focusing on steadily lifting return on investment as Elders became a pure-play agricultural group again after an ill-fated expansion into sectors including telecommunications, automotive components, forestry, aquaculture and insurance under previous management before the GFC.

The shares, which were trading at $14.92 in late May, are still sitting at around $10.23, the level they tumbled to on the day of the exit announcement in mid-November.

Shaw and Partners analyst Philip Pepe has a “buy” rating on Elders and a 12-month price target of $15.50 on the stock.

Mr Pepe said in a research note the strategic investment in PGG Wrightson, which is listed on the NZ Stock Exchange, increased his earnings per share forecasts by 2 per cent and caused him to lift his 12-month share price forecast from $15.10 to $15.50.

Mr Pepe said Elders was “a very well-run company delivering strong results in varied market conditions”. He said while the exit announcement for Mr Allison added additional uncertainty, he believed a “capable” new boss would be found in due course. Mr Allison had “built a business that can survive and thrive without him given the quality and depth of management”, he said.
Elders share price drop of 23 per cent a gross overreaction, says CEO Mark Allison (copyright link)