STORMY conditions continue to buffet rural services business, Elders, which is lowering profit expectations to between $7.5 million and $24.5m for the full trading year, excluding any impact from current woodchip price negotiations.
The new estimate slips well below the healthier $15m to $30m profit forecast of two months ago.
However, Elders' rural services division has weathered the setbacks caused by the big summer wet, lifting its sales per employee 13 per cent and cutting "cost to earn" expenses by 13pc.
The strong performance from Elders' traditional services operations has also helped improve the company's overall sales and earnings.
Although first six months to March 31 recorded a statutory loss of $14.6m after tax and minority interests, the result is much improved on the loss of $165.9m in the same period last year.
The 2011 first half performance was battered by cyclone damage to forestry plantations in Queensland, rain damaged grain quality, weather restrictions to livestock sales and a write-off of the carrying value of Elders' shareholding in HiFert.
Excluding non-recurring items, Elders recorded an underlying profit after tax to shareholders of $1m compared with the loss of $2.4m in the first half of last year.
Underlying earnings before income tax (EBIT) of $20m were up 94pc on the same period for 2010.
Underlying borrowing costs doubled from $8.2m to $16.1m partly because of unfavourable foreign exchange rate.
Elders is also cautious about the continuing strength of the Australian dollar and the rising cost of fuel and wages.
Managing director, Malcolm Jackman, said the performance of Elders' rural services operations was clearly the highlight of the results, particularly noteworthy given the impact of extreme weather events during the period.
"Rural services lifted its underlying EBIT by $12.5m, despite a $6.6m loss from the Elders Toepfer Grain (ETG) joint venture because of unprecedented crop quality downgrades, and extreme rainfall and floods impacting our livestock agency and fertiliser sales in eastern Australia," Mr Jackman said.
Improved sales in farm supply lines, especially agricultural chemicals, complemented by higher product prices and costs savings helped contribute to the turnaround in rural services division's results in Australia and New Zealand.
"Lifting our sales performance and cutting our cost-to-earn have been the key focal points throughout the company."
Mr Jackman said the SalesPlus initiative implemented across the network had played a critical role in supporting Elders' workforce on improving sales performance.
The Australian network lifted sales by 10pc when compared with 2010's first half, while NZ operations rose from the previous corresponding period's $900,000 loss to a profit of $900,000.
However the outlook for the next six months was mixed.
"While we expect our customary increase in second half sales and earnings, our expectations are being moderated by increasing headwinds in a number of business areas," Mr Jackman said.
Seasonal conditions in most regions were promising, with the exception of WA, but results could fluctuate wildly each month.
Farm supplies demand was healthy, but it was competitive and livestock supply volumes were tightening and therefore impacting on agency and trading operations".
Elders Forestry's lower than expected result was caused by a collapse of MIS sales in previous years and lower third party wood sales, whilst Futuris Automotive has been impacted by reduced vehicle build volumes in Australia and overseas.
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