Shedding operations is right, insists Elders chief

THE embattled Elders agribusiness has told shareholders that the decision to sell its operations is right because its high debts will prevent its share price ever really recovering.

Elders wants to sell its biggest unit, the rural services business, and hopes to sell Futuris, its automotive interiors group, by early next year.

The company's share price has collapsed since hitting $23.20 in early 2008 to just 11¢.

Chairman John Ballard told shareholders at a sometimes emotional annual meeting on Thursday that the company's problems and capital structure would weigh on its market value no matter how strong the two businesses were.

"As we enter what appears to be one of the most favourable markets for Australian agricultural business for decades, Elders shareholders face inferior returns as the current ownership structure mitigates against the market value of the core business being reflected in the share price," he said.

"These matters include anticipated debt levels and capital constraints, and the prohibition of hybrid distributions and dividend payments."

The company says it has received many expressions of interest in its rural services unit - including from Ruralco - and points to the US group ADM and its proposed $2.68 billion takeover of GrainCorp as proof of interest in Australian agribusinesses.

The Elders Rural Services name is expected to survive a takeover, due to its 180-year history, with it ranking as the nation's largest real estate company and provider of farm supplies, livestock buying and selling, wool and more. CommBank analysts have valued it at $268 million to $350 million.

Elders had also received non-binding proposals for Futuris, Mr Ballard said, and aimed for a sale agreement in early 2013.

On Monday the company announced it expected to rid itself of most of its forestry assets by early next year, following the sale of 30,000 hectares of timber operations that were part of managed investment schemes (MIS).

Elders's involvement in MIS plantations has been a major source of its woes, with net debt at November 30 of $359.8 million, compared with $381.4 million 12 months earlier. It posted a $60.6 million loss for the year to the end of September. The company blamed weak livestock, farming production and automotive markets for lower sales and earnings in the first two months of its fiscal year.

Mr Ballard also said it had not been possible to insulate the businesses being sold from the impact of the sales process, but both businesses had capable management teams.

"Total group sales and earnings for the year to date are behind that of the previous corresponding period, although it is still too early in the year's trading cycle to make reliable conclusions about any implications of this for full year outlook," he said.