THE rural services company Elders Ltd has crushed shareholder expectations of a turnaround after it said it would make 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 falling 46 per cent to a record low of 44¢ after it announced an underlying loss of $8 million to $14 million, compared to previous profit forecasts in excess of $48 million.
The chief executive of Elders, Malcolm Jackman, apologised to shareholders yesterday, blaming the result on substantially lower than expected June quarter sales.
Mr Jackman said sales in its 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 Indonesian markets. The poor result was exacerbated by a downgrade in expected forestry managed investment schemes earnings, flagged earlier this month.
''I know we are getting a reputation as being a company that only has bad news, but unfortunately we are where we are,'' Mr Jackman said.
Elders raised $550 million from shareholders in a September rights issue with the promise of improved company performance and forecasted 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.
An IG Markets analyst, Cameron Peacock, said the downgrade raised serious questions about the credibility and performance of Elders' management. ''I think it leaves investors scratching their heads how management can get it so wrong,'' he said.
An 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,'' she said. ''That brings about other questions in itself. 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 a further $45 million in cost cuts, including the jobs of chief operating officer Mike Guerin and Australian network head John Molenaar.
But Mr Peacock said cutting costs would not help revenue grow. ''You can cut your costs only so far, but they are not delivering on the top line and I think the market will see through that.''
