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http://www.news.com.au/heraldsun/story/0,21985,26040695-664,00.html

Optimism on'new' Elders

THE third rebirth of Elders since its demise under John Elliott in the 1980s is expected to help the company finally return to its long-term success as a rural services business.

Its restructuring last Friday with the issue of up to 3.6 billion shares was greeted with mixed feelings by shareholders yesterday, with 118 million Elders shares traded on the Australian Securities Exchange.

The shares sold for prices between 21c and 25.5c, closing at 24.5c -- down 14.5c or 37.2 per cent from the closing price on Friday, August 28, when the stock went into a trading halt.

But yesterday's prices were well up on the 15c issue price of the new shares, which surprised some observers.

One analyst said Elders' financial restructuring placed the focus firmly on the ability of its management to run the business.

He said the restructuring was based on earnings before interest and tax margins of 5-6 per cent -- a long way ahead of what they have been in recent times.

"The share price today indicates confidence that they will achieve it," he said.

"If they hit a 5-6 per cent EBIT margin, their net profit after tax will be more than $100 million."

The analyst said the new management team had done everything it said it would and the recapitalisation price of 15c-a-share would be cheap if Elders management gets it right.

The higher Australian dollar also would help Elders by reducing the price of fertilisers, agricultural chemicals and other inputs, although it would impact on commodity prices.

Another analyst said the recapitalisation of Elders had restored its equity and given the company a new start.

"It's virtually a different company under new management," he said.

"Management needs to deliver earnings growth and a return to better seasons would help."

The restructuring had also given Elders more corporate appeal.

Following the recapitalisation of Elders with an equity raising of up to $550 million, the business will be focused on servicing the national rural market.

With the expanding farm sector forecast to incur total costs of $36 billion this financial year, the upside for Elders and the other major rural service company, AWB subsidiary Landmark, is considerable.

Elders and Landmark each has about 20 per cent of the market.

An end to the long-running drought also is expected to play a key role in Elders' future results.