Elders’ chief executive officer, Mark Allison, said the company’s focus remains on increasing client access to a range of markets, including live export markets for their stock.
“We will continue to work with industry live exporters to market our clients’ livestock,” he said. “While we continue to support our clients who participate in the live export industry, the export, logistics and shipping of live cattle to long haul destinations is no longer central to Elders’ strategy, which was devised when demand for live cattle from foreign markets was key to providing marketing options for Elders’ livestock producer clients.”
Elders lost $2.9 million from its live export businesses during the six months to March 2016.
“We do not see that the China feeder and slaughter trade, which is yet to fully open, will deliver margins or a return on capital at levels that meets our, and our shareholders’, expectations. As a result, we consider that the long haul of live cattle is best suited to specialist logistics operators,” said Allison.
The review also showed that the short haul sea export of feeder and slaughter cattle to other Southeast Asian countries such as Indonesia, Vietnam and Malaysia has remained feasible despite the expensive Australian cattle prices which added more pressure on margins.
“We enjoy very good relationships with end user customers in our short haul business. Those relationships have ensured that business has remained viable even in an environment of constrained margin,” Allison further said.
Elders expect an underlying EBIT for the full year to 30 September 2016 within $54 to $57 million. As the decision is finalised, the agribusiness will have circa $25 million of working capital which will be allocated to the different areas that meet returns on capital expectations.