Elders Limited [ASX:ELD] was one of the worst performing stocks on the ASX on Friday — dropping over 15% of its share value.
The share price decline came shortly after a market update addressing current market commentary, including unseasonally dry weather conditions and declining cattle prices.
Their share price fell to $7.06, down $1.28 from the previous day’s trading.
The Australian based agribusiness supplies products such as livestock, farm supplies and grain, along with financial services to the farming community within Australia and New Zealand.
Why did Elders’ share price drop?
The Elders’ seasonal update admitted that the adverse weather conditions throughout Australia has reduced the demand for chemical input, having a negative impact on retail earnings.
In addition, declining cattle prices have also taken a toll on Elders’ earnings.
The update acknowledged that the challenging conditions would impact the 2018 financial year underlying earnings. Underlying net profit after tax (NPAT) is expected to be in the range of $59 million to $63 million, in comparison to $58.4 million in 2017.
Despite the negative impact of the dry conditions on chemical input, the prices and volumes of sheep and wool have remained consistently strong. On top of this, the unseasonal conditions have allowed feedlot utilisation to remain at high levels.
Elders’ Chief Executive Officer, Mark Allison said that,
‘The forecast results reflect the Company’s commitment to the strategic Eight Point Plan and the resolve to achieve continuous high quality growth, despite the difficult trading conditions.’
What can we expect from Elders?
Although investors were disappointed with the update, Elders are still on track to slightly lift their profit in the 2018 financial year.
Management are still confident that they will achieve long-term growth.
‘We believe Elders remains well placed to achieve our target of 5-10% EBIT growth through the agricultural cycle to 2020’, Mr Allison said.
Despite the difficult trading conditions, if Elders are still able to make a profit, this might be a stock worth looking into.
For Money Morning
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