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Our clients and their needs are our central focus ~ all day, every day. Elders is an Australian company whose principal business is rural services. Australian and New Zealand primary producers are the central focus of our business. Elders provides the physical, financial and service inputs for them to achieve the most successful production and sales from their efforts. Our trading operations and joint ventures work to add value and achieve premium prices for Australian agricultural produce in world markets. Elders also operates leading businesses in forestry and automotive component manufacture. Front cover: Elders’ clients (top left clockwise): Russell Hall, the Butterick family, Glen Ford and his grandson, Alec Moore and his wife Jo Moore. 1 Elders’ four Strategic Cornerstones Elders is building its future on four strategic cornerstones identified as being essential for the achievement of the excellence that our shareholders and clients desire: Generating improved returns for Procuring and moving our clients and shareholders by the right product at the right being the best at understanding time most efficiently. and serving client needs. High Supply performance chain sales excellence capability Cost and Superior service- capital effective management technology Developing and applying Managing the Company’s technology to improve financial resources to advantage outcomes while meeting cost efficient operation and improve and service quality standards. shareholder value. 2 Our Business Rural Services Forestry Futuris Automotive • 338 Australian and 26 New • One of Australia’s largest • Design, manufacture and Zealand points of presence hardwood plantation managers supply of automotive interior • Farm inputs – supply of (by estate size) systems (seating, steering, agricultural chemicals, • Manages over 170,000 hectares trims, carpets etc) fertilisers, animal health and across Western Australia, general rural merchandise Victoria, South Australia and • Production advice Queensland • Farm outputs – marketing and • Provider of MIS plantation sale of livestock, wool and grain grown hardwood • Financial and real estate services • Trading of livestock, wool and grain • Network related – supply chain assets to leverage the network distribution and accumulation capability Sales Revenue: $1,712 million Sales Revenue: $100 million Sales Revenue: $257 million Employees*: 2,485 Employees*: 11 2 Employees*: 738 *Full time equivalent employees at 30 September 2010. A further 14 FTE employees are employed in Corporate roles. 3 2010 The Year in Brief Underlying profit to shareholders Key Financial Results $million 2009 2010 5 Year ended 30 September 2010 2009 3.0 0 $ million unless indicated otherwise -5 Sales Revenue from continuing operations 2,069.1 2,341.2 -10 -15 Underlying EBIT 34.0 37.0 -20 (24.4) Net interest 30.0 76.9 -25 Underlying profit before tax 4.0 (39.9) Statutory profit to shareholders Minority interests (5.0) 1.4 $million 2009 2010 0 Tax (expense) credit on underlying profit 4.0 14.1 -100 Underlying profit to shareholders 3.0 (24.4) (217.6) -200 Non-recurring items after tax (220.6) (408.3) -300 (432.7) Statutory (or ‘Reported’) profit (217.6) (432.7) -400 Cash flow from operating activities (110.5) (169.6) -500 Net Debt Borrowings 497.6 1,199.3 $million Net Debt 435.1 869.5 1000 869.5 Net Assets 1,006.1 701.7 800 600 Earnings per share (cents) - underlying basic 0.7 (30.1) 435.1 400 Earnings per share (cents)- statutory basic (51.1) (534.8) 200 Gearing 43% 124% 2009 2010 0 Reporting Period, Terms & Abbreviations Reporting period Abbreviations and terms A reconciliation of underlying profit to statutory profit is disclosed in the Discussion This document reports on the Company’s This Report uses terms and abbreviations and Analysis of the Financial Statements financial and operating performance for relevant to the Company and its accounts. on page 64. the 2010 Financial Year, which comprised The terms “the Company”, “Elders Limited”, the 12 months to 30 September 2010. “Elders” and “the Group” are used in Annual Report this report to refer to Elders Limited and This is the first 12-month report since Elders This document has been prepared to provide changed its balance date from 30 June to or its subsidiaries. shareholders with an overview of Elders 30 September. The change, made to align The terms “2010” or “2010 financial year” Limited’s performance for the 2010 financial the Company’s financial reporting with refer to the 12 months ended 30 September year and its outlook. agricultural industry practice, was effected 2010 unless otherwise stated. References The Annual Report is mailed to shareholders through a 15 month transitional year to to 2011 or subsequent years refer to who elect to receive a copy and is available 30 September 2009. the 12 months ended 30 September of free of charge on request (see Shareholder As required by the Corporations Act, the that year. Information printed in this Report). The financial statements contained in the References to 2009 relate to the 12 months Annual Report can be accessed via the Annual Financial Report of this document ended 30 September unless otherwise Company’s website at www.elders.com.au use the financial results published in stated. References to 2008 or preceding Notice of Meeting the 2009 Annual Report (ie for the years refer to the 12 months ended 30 June The 2010 Annual General Meeting of 15-months to 30 September 2009) as of that year. prior year comparatives. Elders Limited will be held on Thursday, Underlying profit 16 December 2010, commencing at As an aid to the understanding of results on a 10.00 am in Hall B, Adelaide Convention like-for-like basis the results for the previous This document uses analysis of underlying Centre, North Terrace, Adelaide, South corresponding period (ie for the 12 months to profit to enable analysis of performance Australia. A formal Notice of Meeting has 30 September 2009) have been calculated between periods exclusive of the impact of been mailed to shareholders. Additional and are utilised in the discussion and analysis non-recurring or ‘one-off’ items. Underlying copies can be obtained from the Company’s of performance over the pages 4-23 and profit measures reported by the Company registered office or downloaded from its 64-65 of this document. It should be noted have been calculated in accordance with website at www.elders.com.au that these comparatives are unaudited and the FINSIA/AICD principles for the reporting provided for comparative purposes only. of underlying profit. 4 Safety Lost Time Injury Frequency Rate reduced from 7.38 to 5.00 Profit and loss Underlying profit after tax of $3.0 million vs underlying loss of $(24.4) million Non-recurring items totalling $(220.6) million after tax: - Forestry related items totalling $(144.9) million - Rural Services items totalling $0.8 million - Automotive item of $0.6 million - Corporate including tax, legal and project costs of items of $(60.9) million - Discontinued operations and impairment of non-core assets $(16.2) million Reported loss after tax of $217.6 million compared with loss of $432.7 million Balance sheet and finance Net debt of $435.1 million as at 30 September Borrowings reduced from $1,199.3 million to $497.6 million Gearing reduced from 124% to 43% Net underlying interest reduced 61% to $30 million. Further debt reduction in prospect post-balance date with completion of Rural Bank shareholding sale Corporate Cost-to-Serve project initiated to reset cost base to sustainable level through $45 million annualised reduction Rural Services Sales revenue from continuing operations down 15% to $1,711.9 million Underlying EBIT of $23.4 million down 36% from $36.5 million Reported EBIT of $13.7 million up from loss of $(105.2) million Go-to-Client project launched; a major investment in sales capability, discipline and building a client-centric company Forestry Sales revenue of $100.3 million down from $111.2 million 2010 MIS Project sales of $1.6 million; MIS market contracted to 10% of 2008 level and 28% of 2009 level Underlying EBIT of $8.5 million, down from $13.8 million in 2009 Reported EBIT loss of $(158.6)million impacted by non-recurring items arising from collapse of FEA and impact of fungal infection and drought on certain plantations Plantation woodchip price maintained Acquired outstanding interests in Albany Chip Terminal (previous interest 50%) Automotive Sales revenue up 14% to $256.9 million Underlying EBIT of $15.0 million up from underlying EBIT loss of $(3.5) million Chinese operations grew in scale, volume and earnings generated New supply contracts won in China, Thailand and North America 5 From the Chairman Elders has the potential to be a great Australian company again instead of simply being an Australian company with a great history. John Ballard This is the first annual report by your Company The factors responsible for the variances against since I joined the board and assumed the role prospectus are addressed in detail by the Chief of Chairman. Executive in his report following. Without reiterating this analysis, the Company has been The previous Chairman, Mr Stephen Gerlach, faced with the challenge of dealing with, and announced his impending retirement to responding to, markets and trends diametrically the Company’s 2009 annual general meeting of opposed to those forecasts. shareholders, and following a recruitment and interview process, my appointment was made Elders has not been alone in experiencing in September 2010. I am delighted to be able adverse financial consequences from these to serve the shareholders of one of Australia’s factors, but it has been uniquely affected by the most historic and important companies. Elders coincidence of price and activity downturns is a core service provider to the Australian in rural services markets with unfavourable and New Zealand farm sector and has a brand events in the forestry sector and its own forestry and reputation that is synonymous worldwide operations.