The Elders Ltd (ASX: ELD) share price fell 13% in early trading after reacting to a trading update and ACCC approval.
Elders says its expansive network across Australia offers links to agricultural markets, tailored advice and specialist knowledge across a range of products and services, including farm supplies, agronomy, livestock, wool, grain, finance, insurance, and real estate.
ACCC approval for Delta acquisition
The company announced that the ACCC has announced it will not oppose Elders buying Delta Agribusiness, which is a similar sort of business to Elders.
It has been agreed that six Delta branches in Western Australia will be divested. The total FY25 underlying EBIT of these six branches to be divested it estimated to be less than $0.3 million.
Trading update
Elders also revealed how trading has been going for both businesses.
It noted that Delta’s FY25 performance was negatively impacted by lower retail sales resulting from dry conditions in southern Australia and a later start to the cropping season.
Additionally, margins were impacted by heightened competitive pricing resulting from the later season and desire from crop protection traders to avoid carry-over inventory.
Elders said the outlook for Delta remains in line with the assumptions that underpinned the acquisition thesis and associated capital raising completed in December 2024, with earnings weighted to Elders’ second half.
Elders said it has observed similar themes in its own business. Negative impacts from dry conditions are impacting the retail business, with the most pronounced impacts in South Australia and Western Victoria. These impacts continued through April and May as drought conditions persisted.
The company did say that conditions in these impacted areas “significantly improved from June”, resulting in increased demand for crop protection products in the fourth quarter. However, improved trading conditions in recent months have not completely offset the impact from the challenging conditions in the third quarter.
Elders is expecting underlying EBIT to be between $142 million to $146 million for FY25. It also expects an improvement in leverage (debt) year on year, though below its target.
Final thoughts on the Elders share price
As an agricultural business, Elders typically experiences volatility. I think this could be a good time to consider investing for when agricultural conditions improve in the medium-term at some point.
