Full Year 2024 Elders Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: William Park - Citigroup Inc. - Analyst : Thanks, Mark and Paul for taking my question. Firstly, could you put to what you have seen in the last 1.5 months across your business units, and I think you talked to sort of manage solid momentum emerging out of second half continuing through the first quarter. But just around the ground, what you're seeing across your businesses? Thank you.

Question: William Park - Citigroup Inc. - Analyst : Thank you. And just on the synergies you called out for Delta acquisition of $12 million at the EBITDA level, can you -- and you alluded to on the call that this is mostly to do with backward integration. Can you just step through what sort of -- and I guess this is subject to the completion of the actual acquisition itself, but how come it's across sort of three years? And what sort of run rate you would expect in FY23 -- '25, sorry?

Question: William Park - Citigroup Inc. - Analyst : Thank you. And just one last question from me. I know you don't have quantitative sort of guidance out there for FY25. But just in terms of -- I mean, you alluded to sort of in line with your expectations around normalized first quarter at the moment. But if you look through the entire year, FY25, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 17, 2024 / 11:00PM, ELD.AX - Full Year 2024 Elders Ltd Earnings Call I know consensus expectation is around $170 million, in terms of your comfort levels around that and excluding, I guess, the potential uplift from Delta acquisition, are you comfortable with this sort of level? Or what are some of the strength factors that you need to see in your favor between now and the end of the year to get to this sort of level?

Question: Richard Barwick - CLSA Limited - Analyst : Hi guys. I'm just talking about the ACCC concerns. Mark, you obviously mentioned that there is a bit of crossover. But equally, as you said, it's a competitive market. So is your expectation that you'll get approval across all sites for the Delta acquisition? Or is there some risk in specific regions or specific locations that you might get some pushback from the ACCC?

Question: Richard Barwick - CLSA Limited - Analyst : Okay. And then just a quick one on synergies. I mean, the $12 million, which you're saying is mostly driven by the backward integration. I'm a bit surprised you're not calling out more around some sort of operational or cost savings, given that the businesses are pretty complementary, at least

Question: Richard Barwick - CLSA Limited - Analyst : Okay. Understood. And just one quick clarification. I think you, I just want to double check. You said AIRR is now contributing just under $50 million of EBIT and Titan also the number you said there was a $43 million of EBIT.

Question: Richard Barwick - CLSA Limited - Analyst : [45 to 50] for Titan and just under $50 million for AIRR.

Question: Richard Barwick - CLSA Limited - Analyst : All understood. Alright, thank you guys.

Question: James Ferrier - Wilsons Advisory and Stockbroking Limited - Analyst : Good morning, Mark and Paul. Thanks for your time. Could I ask. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 17, 2024 / 11:00PM, ELD.AX - Full Year 2024 Elders Ltd Earnings Call

Question: James Ferrier - Wilsons Advisory and Stockbroking Limited - Analyst : Can I ask you about the real estate business, the real estate services business, first of all? I think quite a significant uplift in gross profit there, $23 million. I mean you described it as predominantly driven by the acquisitions. Can you provide some color around the organic or the like-for-like performance across rural, resi and property management, so just excluding the acquisition contribution?

Question: James Ferrier - Wilsons Advisory and Stockbroking Limited - Analyst : Yeah, sure. Okay. Second question is on slide 25, over in relation to slide 25. I was just looking at the explanation there around the debtors towards the bottom where it describes the increase in debtors partly due to the delayed 2024 winter crop and there's an itemization on that referenced at $127 million. And then there's two other issues that are noted there increased demand for seasonal finance and an increase in arrears. Can you add some color to those two issues and if you can, quantify them?

Question: James Ferrier - Wilsons Advisory and Stockbroking Limited - Analyst : Thanks Paul. That's great color. And then lastly, when we're looking at Delta's earnings FY23 into FY24, it looks like that business fared a lot better than Elders did in that December '23, quarter where the Elders business had a really difficult period around the season and the demand profile associated with it. So does that suggest that Delta probably doesn't have the same quantum of cyclical earnings recovery in this current quarter we're sitting in? Obviously, you've given some numbers around the Elders' uplift. It's more like a 25%, 30% uplift in EBIT when that first quarter normalizes. So is that information provided today sort of suggesting that Delta doesn't have the same quantum of cyclical earnings recovery? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 17, 2024 / 11:00PM, ELD.AX - Full Year 2024 Elders Ltd Earnings Call

Question: James Ferrier - Wilsons Advisory and Stockbroking Limited - Analyst : Makes sense. Thanks for your time.

Question: John Campbell - Jefferies - Analyst : Hi guys. Thanks for the opportunity. Just a couple of questions in relation to the acquisition. Firstly, is the -- is your return to target leverage by FY25, does that include the $50 million over rate with the Delta acquisition.

Question: John Campbell - Jefferies - Analyst : Yeah. But it assumes, does it assume Delta has been acquired and it's part of the business throughout '25 or at least by the settlement date that you're talking about?

Question: John Campbell - Jefferies - Analyst : Right. Okay. So yes, that's sort of like pro forma, assuming a full year of Delta. Yeah. Got it. And just the other question it seems, and I might be wrong on this, but it seems like you paid around about 7 times EBIT post synergies for AIRR and 9 times for Delta. Does that reflect the sort of size and market position of Delta is the AIRR? Or is there something between the two businesses for that valuation uplift?

Question: John Campbell - Jefferies - Analyst : Got it. Yeah, It looks a great deal. It's sensible in terms of all the criteria that you state. Look, just the last thing, Mark, I mean I know that you say you don't expect any ACCC issues. I presume if there was some regional concentration concerns you could easily solve them carving out bits and pieces, and I'm sure you don't want to do that at this stage, but I presume that there's, overall -- there's nothing that comes solved here.

Question: John Campbell - Jefferies - Analyst : Thanks for that.

Question: Ben Wedd - Macquarie Research - Analyst : Hi, Mark and Paul. Thanks for taking my question there. Just the first one on the gross margin side, which you've put on here, which is helpful at the back of the pack, just around the reduction in gross margin in Q3. Looks like that was sort of a larger magnitude to the Q1, which we know was clearly adversely impacted by the seasonal trading there. Could you just sort of step through some of the factors there and why that did flow through into Q4?

Question: Ben Wedd - Macquarie Research - Analyst : Yeah, great. Understand. And then just in terms of the working capital position and thanks for the detail around some of the debtors and the unwind there. I mean the first half typically sees a working capital build, I think that historic leverage is around sort of $75 million. So would you sort of expect that to be less this year considering the sort of increased quantum of debt reduction? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 17, 2024 / 11:00PM, ELD.AX - Full Year 2024 Elders Ltd Earnings Call

Question: Ben Wedd - Macquarie Research - Analyst : That's great. Thank you both.

Question: Evan Karatzas - UBS Investment Bank - Analyst : Okay. Just sort of two on the business and on the acquisition as well. Can I just go back to that Q3 margin decline my understanding is correct because I just thought you'd said at the 1H that the price decline impacts were sort of more isolated to 1H. So are you saying that the pricing took another leg down in that Q3 period? Is that the way to think about it for those retail products?

Question: Evan Karatzas - UBS Investment Bank - Analyst : So can you put a number on that because I mean that should normalize into '22, I'm guessing, right?

Question: Evan Karatzas - UBS Investment Bank - Analyst : Okay. That's helpful. And then just the cost base as well as obviously, it stepped up pretty materially in '24. How are you thinking about that just on like, I guess, an all-in basis as we go into FY25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 17, 2024 / 11:00PM, ELD.AX - Full Year 2024 Elders Ltd Earnings Call

Question: Evan Karatzas - UBS Investment Bank - Analyst : Okay. So I guess another 2% from a base growth, can you put a number on how much the, like the transformation or the acquisition annualized for cost base even if it's rough will be.

Question: Evan Karatzas - UBS Investment Bank - Analyst : Okay. Fine. All right. Okay. And just one more, if I can. Just with the shares issued to Delta to management. Can you maybe just comment just on, I guess, how deep those shares goes? It's just sort of the executive team or does it go down to the [68%-odd] brand I guess...

Question: Evan Karatzas - UBS Investment Bank - Analyst : Okay. And then maybe just final, just around the four independents as well, like just how you're thinking about the process to retain those branches now that they'll I guess be owned by as a parent company as Elders?

Question: Evan Karatzas - UBS Investment Bank - Analyst : Yeah, year wholesale branches.

Question: Evan Karatzas - UBS Investment Bank - Analyst : Thanks for your time. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 17, 2024 / 11:00PM, ELD.AX - Full Year 2024 Elders Ltd Earnings Call