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Elders shares plummet 46%
PHILIP WEN
June 23, 2010

RURAL services company Elders Limited has crushed shareholder expectations of a turnaround year after announcing it will slump to a full-year loss - less than six weeks after delivering an upbeat first-half result.

The agribusiness group saw almost half its market value wiped out yesterday, with Elders shares plummeting 46 per cent to a record low of 44 after it announced an underlying loss of $8 million to $14 million, compared with previous profit forecasts of more than $48 million.

Elders chief executive Malcolm Jackman apologised to shareholders, blaming the result on substantially lower than expected June quarter sales.

Mr Jackman said sales in the company's rural services operations were more than 20 per cent behind budget, due to persistently low prices for its key farm supply lines, subdued activity in real estate, and softness in its New Zealand and Indonesia markets. The poor result was exacerbated by a downgrade in expected forestry managed investment scheme earnings.

''I know we are getting a reputation as being a company that only has bad news, but unfortunately we are where we are,'' he said.

Elders raised $550 million from shareholders in a September rights issue with the promise of improved company performance and forecast profits of $55.7 million. The company reiterated that guidance on May 17 when it declared a ''results turnaround'' for the six months to March, and predicted further improvement and ''a substantial lift'' in second-half earnings.

IG Markets analyst Cameron Peacock said the downgrade begs serious questions regarding the credibility and performance of Elder's management. ''I think it leaves investors scratching their heads how management can get it so wrong,'' he said.

RBS Morgans analyst Belinda Moore said the extent of the downgrade was ''a shock and extremely disappointing. I think it is a fair comment to say that the results they are announcing today are a lot worse than their competitors.

''Given the results that it's producing compared to its peers, there's obviously some internal issues that need to be addressed.''

Mr Jackman said Elders had worked hard to reduce costs and increase gross margins, but ''the end result is that we have been working flat out to stand still''. He announced another $45 million in cuts, including the jobs of chief operating officer Mike Guerin and network head John Molenaar.