Dry weather and heavy debts continue to plague the farming sector, with Australia's largest rural services company Ruralco sinking to a loss during the first half.
The company's stake in listed rival Elders also caused it headaches, forcing it to take a $5.9 million hit on its exposure. This sent Ruralco into a $500,000 loss for the first half, compared to profit of $10 million for the same period last year.
Abnormally hot and dry weather across east and central Australia had driven down prices of sheep and cattle and reduced demand for rural supplies, Ruralco said.
The conditions have been felt across much of the agriculture sector, with Elders and Nufarm also flagging profit downgrades. Ruralco warned investors last month its underlying profit could fall by up to 70 per cent for the period, due to lower livestock prices, slower sales and higher costs tied to its pursuit of Elders.
Instead, its underlying profit was 50.9 per cent lower to $5.4 million, excluding write downs.
Ruralco chief executive John Maher said despite unusually poor conditions, the business remained resilient.
"The fundamentals of our business and the industry in general remain in good shape," he said. Ruralco was forced to write-down its 12.4 per cent stake in Elders Rural Services in October, after Elders failed to refinance debt on the business and put it up for sale.
Ruralco said it would push ahead with an acquisition of the business, which it began in March. The competition watchdog is reviewing the takeover and a decision is due at the end of the month.
Ruralco is planning to shave $8 million off operational costs by March 2014, with savings made primarily through redundancies.
The company said it would continue to pursue regional partnerships with other businesses to increase its footprint, and announced it had acquired Victorian livestock group Saffin Kerr Bowen.
RBS Morgans senior analyst Belinda Moore said the underlying result was strong considering how challenging conditions had been.
"It's been the worst first half year in many, many years," she said
She said the financial year would be tough on the business but its planned $8.7 million in cost savings would help its outlook.