Retail update: Rural and garden nursery
Elders forecasts improved outlook
Perrennialle Plants has recorded a massive increase in sales of 1400% since joining the Buy From The Bush movement
Fri Mar 18 2022
Agricultural services company Elders said it will exceed analysts' consensus forecasts for the full year to September 30. Chief executive Mark Allison said:
After finalisation of the February trading numbers, which continue improved earnings for the first quarter, we now believe we will exceed analysts' consensus for the full year to 30 September 2022 and produce an underlying EBIT (earnings before interest and taxes) result ... (20 to 30% above) ... which is necessarily broad given we are only five months into our financial year.
However, the improved guidance was subject to a number of caveats, including the potential of supply chain disruptions as a result of COVID-19 and geopolitical events, unexpected changes to seasonal conditions and commodity prices, as well as severe weather events.
Mr Allison said Elders had witnessed improvement in its retail and wholesale segments compared with the same time last financial year due to increased sales. (In 2019, Elders acquired Australian Independent Rural Retailers, a wholesale supplier of about 6000 products to 240 independent rural merchandise retailers.)
Favourable seasonal conditions and fears of supply chain disruptions have pushed many growers to order their herbicides and insecticides early, helping the company beat profit forecasts. He said:
While we believe some of these sales are forward purchasing by primary producers seeking to mitigate the risk of instability in supply chains, we consider the majority of sales are a result of increased activity.
Mr Allison also said a private label strategy in its herbicides and insecticides business was also paying off. Elders operates the Titan Ag brand after buying it in 2018.
The Elders Agency business, which conducts cattle and sheep sales, was performing strongly because of high prices. It had been offset to a small extent by lower volumes because of restocking and the good availability of feed on farms.
The group's real estate business is trading ahead of expectations because of increased turnover and high demand.
After its near collapse during the Global Financial Crisis in 2008 when its debt levels were extremely high (to $1.4 billion), the company finds itself taking advantage of exceptional growing conditions across most of Australia, many farming businesses cashed-up and looking to upgrade their equipment, and the COVID-19 pandemic triggering an exodus of people from the city to the country, to the benefit of Elders' property sales business.
In November 2021, Elders announced a 22% rise in net profit after tax to $149.8 million for the 12 months ended September 30.Elders' AIRR acquisition helps drive profit - HNN Flash #72, November 2021
Soon after launching an e-commerce store for Perrennialle Plants, which owner Chris Cuddy promoted via Facebook and Instagram, it was featured on the Buy From The Bush (BFTB) pages which he describes as a "game changer" for his business.
In addition to increasing sales since being part of BFTB, Mr Cuddy has renovated a building on the main street of Canowindra (NSW), to house the new nursery using local tradespeople and consciously sourced building materials locally to inject cash back into the town. He and wife Nerida have also opened a plant emporium, cafe and event space on site.
Prior to this, in 2019, the business was under severe strain owing to worsening drought so Mr Cuddy began to look at other revenue pathways to keep the business afloat.
The success he is experiencing feature in a new BFTB Impact Report. In the report, Mr Cuddy said:
Opening the emporium has created so much goodwill from the people in our town, and everyone is so grateful. We would never have taken the risk to expand if it wasn't for what happened with Buy From The Bush.
The report has shown over the last three years, BFTB has generated more than $9 million in revenue for rural small-medium businesses and dramatically shifted public perception of rural businesses and communities, with more consumers now reporting a stronger emotional connection to the bush
Over 70% of those surveyed said BFTB had positively changed their views on regional communities and the quality of products regional businesses could deliver.
The study also paints a strong picture of the changing faces of regional economies, leaning heavily away from the narrative of the dusty middle-aged male farmer and more towards digital business with over 96% of rural small medium business respondents believing that digital businesses are crucial to their income and the economies of their communities.
The report also found that digitally enabled small businesses could crisis-proof rural communities.