Agribusiness Elders (ASX:ELD) posted improved sales and earnings together with reduced debt in its 2011 interim profit announcement issued today. It however lowered its profit forecasts for full year underlying profit.

The company announced a statutory loss of $14.6 million after tax and minority interests for the six months to 31 March compared with a loss of $165.9 million in the previous corresponding period.

Both periods were said to have been affected significantly by non-recurring items, with the 2011 first half including previously advised impairments to recognise cyclone damage to forestry plantation, the write-off of the carrying value of Elders’ shareholding in HiFert and dividends and gain on sale from the divested shareholding in Rural Bank.

However, given the risks to earnings that are continuing to emerge, Elders has lowered its expectations for FY11 underlying profit after tax to a result that approximates the low end of the current market range of between $7.5 million and $24.5 million, exclusive of any impact arising from woodchip price negotiations.

This compares to the previous guidance of a result that fell within the previous market range of $15 million and $30 million after tax and the FY2010 comparative underlying net loss after tax of $(10.0) million.

Elders said another trading update would be held in July, or earlier should circumstances permit.

Mixed outlook

Despite the significant sales improvement, Chief executive Malcolm Jackman said that the outlook for the closing six months of the year for the company’s various operations was mixed.

“While we are expecting our customary increase in second half sales and earnings, our expectations are being moderated as headwinds increase in a number of business areas.

According to him, Rural Services operations are clearly on track, notwithstanding the disruptions of the first half. Meanwhile, sales and demand levels for farm supplies remain healthy, albeit competitive. Livestock supply volumes are continuing to tighten, impacting both the agency and trading operations.

“Automotive operations now face stronger headwinds than anticipated with forecast motor vehicle build levels in Australia having been revised downward substantially in recent weeks, and the rising A$ level posing further threats,” Mr Jackman said.

Forestry operations are also facing softer than anticipated woodfibre demand volumes following the Japanese tsunami and the added uncertainty arising from high exchange rates and the yet to be concluded annual woodchip price negotiations with Japanese buyers. The outcome of these price negotiations, which is expected to be finalised in the next few weeks, has the potential to materially impact underlying earnings.

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