Elders' Short-Term Headwinds, Long-Term Opportunities

Elders Limited (ASX:ELD), an Australian agribusiness giant, recently reported a resilient yet lackluster earnings result for the 12 months to 30 September 2024. The company's underlying EBIT of $128.0 million marked a 25% decrease compared to the previous year, with a return on capital of 11.3%. Although the first quarter proved challenging, the company's product, channel, and geographical diversification helped mitigate market headwinds, and it remains committed to its transformational projects.

Elders' FY24 earnings were impacted by an underperforming first quarter, lower crop protection margins, and subdued client sentiment. However, the company's continued investment in key transformational projects, such as Elders Wool and Systems Modernisation, positions it for long-term growth and improved operational efficiency. These initiatives, while impacting short-term earnings, are expected to deliver significant benefits for both Elders and its clients in the long run.

The company's acquisition of 21 new points of presence in FY24 expanded its network and provided incremental earnings benefits. Elders' expansion efforts align with its Eight Point Plan, aiming to deliver 5% to 10% growth in EBIT and EPS through the agricultural cycles while maintaining a compelling ROC of at least 15%. Key performance indicators (KPIs), such as underlying EBIT, return on capital (ROC), earnings per share (EPS), and cash conversion, guide Elders' progress towards its growth strategy.

Elders' Systems Modernisation project aims to improve operational efficiency by streamlining business processes, enhancing data management, and boosting customer experience. The new, integrated technology platform will provide real-time insights and analytics, enabling data-driven decisions and resource allocation optimisation. This investment, despite its short-term impact on earnings, is expected to pay off in the long term by increasing productivity and revenue.



Elders' wool agency, Elders Wool, brings several benefits to the livestock industry. By improving customer service in Western Australia and Victoria, it enhances Elders' market reach and strengthens its position in the wool sector. The opening of new facilities in Rockingham (WA) and Ravenhall (Victoria) demonstrates Elders' commitment to investing in modern infrastructure to better serve its clients. These strategic moves are expected to translate to increased earnings through enhanced market penetration and customer loyalty.

In conclusion, while Elders' (ASX:ELD) earnings were lackluster in the short term, investors should look beyond these temporary headwinds and focus on the long-term benefits of its transformational projects. These initiatives, along with its acquisition of new points of presence, position Elders for improved operational efficiency and earnings growth. By adhering to its Eight Point Plan and tracking key performance indicators, Elders is well-positioned to achieve its targeted 5% to 10% growth in EBIT and EPS.