ELDERS LIMITED — Interim / Quarterly Report 2012

May 20, 2012

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21 May 20 1 2

2012 Half- Y ear R esul t s Dis c ussi o n an d Ana l ysis

Attached i s the discus s ion and an a lysis of the financial results for the 6 month p e riod ended 31 March 2012.

Peter Hastings Company S ecretary

1

H1 12 Financial Results

Discussion and Analysis

21 May 2012

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21 MAY 2012

DRA

21 May 2012

2012 First Half Financial Results

Discussion and Analysis

This document provides discussion and analysis of Elders Limited’s financial results for the 6 months to 31 March 2012 as announced to the ASX today.

Calculation of underlying income

This document and accompanying announcements, such as the H1 12 Investor Presentation and 2012 First Half Financial Results Press Release, refer to and discuss underlying profit to enable analysis of like-for-like performance between periods exclusive of the impact of discontinued operations or events which are not related to operating performance.

Underlying profit measures reported by the Company have been calculated in accordance with the FINSIA/AICD principles for the reporting of underlying profit. Underlying profit is non-IFRS financial information and has not been subject to review by the Company’s external auditors, but is derived from audited accounts through removing the impact of discontinued operations and items unrelated to operating performance.

A reconciliation between statutory and underlying profit is provided on page 3 of this document.

Previous period comparatives

Previous period comparatives presented in the Annual Financial Report and this document recognise the impact of changes in the composition of the business to recognise discontinuation of assets and operations divested. Details of discontinued operations are provided in Note 16 of the 2012 Half Year Financial Report.

Abbreviations & Definitions

	2011 and FY11:	12 months ended 30 September 2011
	2012 and FY12:	12 months ended 30 September 2012
	H1 12 and H1 11:	first half year: ie six months to 31 March of 2012 or 2011
	pcp:	previous corresponding period, 6 months ended
		31 March 2011
	EBIT:	earnings before interest and tax
	Statutory /Reported	profit or loss as defined by International Financial Reporting
	profit/loss:	Standards (IFRS)
	Underlying profit/EBIT:	profit/EBIT before recognition of discontinued operations
		and items unrelated to operating performance
	Contribution:	earnings before support centre and other costs,
		interest and tax; ie gross margin less costs
	K:	thousand
	m:	million
	n/m:	not meaningful
	Elders:	Elders Limited and or its subsidiaries
	Company:	Elders Limited and or its subsidiaries
	AWH:	AWH Pty Ltd logistics joint venture

Further Comment:

Further Comment:
Malcolm Jackman Chief Executive Officer	0439 642 876
Further information:
Mark HoskingChief Financial Officer	0439 833 816
Don Murchland GM Investor & Corporate Relations	0439 300 932

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Reconciliation of Statutory and Underlying Profit

The statutory profit after tax of $40.5m for the six months to 31 March 2012 and the prior corresponding period (a loss of $14.6m) both included a number of items considered either the result of ‘one-off’ events and unrelated to operating performance or relating to discontinued operations.

Calculation of underlying profit by excluding these items is considered to enable more meaningful comparison of results between periods by providing like-for-like figures for continuing operations that are not impacted by anomalous or one-off events.

Underlying profit for the six months to 31 March is calculated as follows:

Statutory and Underlying profit
$m after tax 6 months to 31 March:	2012	2011
Reported profit/(loss) after tax	40.5	(14.6)
Items excluded from underlying profit
Rural Services	(1.5)	2.0
Automotive	(1.9)	(0.1)
Corporate	9.1	(20.9)
Forestry	(12.0)	(5.2)
Tax impact (Net)	40.7	2.1
Total items excluded from underlying profit	34.4	(22.1)
Underlying NPAT to shareholders	6.1	7.5

Items excluded from Statutory Profit to determine underlying profit for the 6 months to 31 March 2012 comprise:

• Rural Services related items of $(1.5)m before tax, principally being results of discontinued items (including MV Torrens, EWI and Seedmark).

• Automotive related items of $(1.9)m before tax for redundancies brought by restructuring at the Campbellfield facility.

• Corporate items of $9.1m before tax, which principally comprise interest of $10.9m to be refunded by the ATO as a result of the successful objection to an amended tax assessment offset by finance costs attributable to funding specifically designated for forestry assets of $(1.5)m.

• Results from discontinued forestry assets and operations of $(12.0)m for the period.

• The tax impact of items excluded from underlying profit is $40.7m. This figure includes:

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• a $58.3m gain arising from the reversal of provisioning, and refund of amounts paid, in respect of the amended tax assessment successfully contested;

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• reduction in deferred tax assets of $(18.0)m through utilisation and derecognition of tax losses;

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• and other items totalling $0.4m.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Reported and Underlying Profit measures

Profit: Reported and Underlying
$m 6 months to 31 March:	2012	2011	Change
Underlying EBIT	21.3	22.1	- 4%
Net underlying borrowing costs	(12.7)	(12.6)	+ 1%
Underlying profit/(loss) before tax	8.6	9.5	- 9%
Tax on underlying profit	(1.1)	-	n/m
Non-controlling interests	(1.4)	(2.0)	- 30%
Underlying NPAT to shareholders	6.1	7.5	- 19%
Items excluded from underlying profit1	34.4	(22.1)	n/m
Reported profit/(loss) after tax	40.5	(14.6)	n/m
Earnings per share (cents)
– reported basic	9.0	(3.3)
– reported diluted	3.5	(3.3)
– underlying basic	1.4	1.7
– underlying diluted	0.5	1.0

Analysis of movement in profit before tax

Profit Movement Analysis
$m 6 months to 31 March:
H1 11 Reported profit before tax		(13.7)
Excluded from H1 11 underlying profit before tax		(23.2)
H1 11 Underlying profit before tax		9.5
Change in H1 12 from:
Rural Services EBIT	0.9
Automotive EBIT	0.7
Corporate & other EBIT	(2.4)
Change in EBIT:		(0.8)
Change in net underlying borrowing costs		(0.1)
H1 12 Underlying profit before tax		8.6

1 Items excluded from underlying profit are detailed on page 3 of this document

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Key Profit and Loss Items

Key Profit and Loss Items
$m 6 months to 31 March:	2012	2011	Change
Sales revenue
- Continuing operations	1,029.2	1,046.3	- 2%
- Discontinuing operations	9.3	61.5	- 85%
Total sales revenue	1,038.5	1,107.8	- 6%
Depreciation & amortisation
- Continuing	12.9	12.7	- 2%
- Discontinuing	-	1.8	n/m
Income from associates
- Continuing	4.2	7.3	- 42%
- Discontinuing	(0.5)	(6.9)	- 93%
Reported net borrowing costs	(3.2)	(27.9)	- 89%
Non-recurring net borrowing costs	9.5	(15.3)	n/m
Underlying Net borrowing costs:
- Interest income	5.9	5.0	+ 18%
- Interest on Bank debt	(12.2)	(11.5)	+ 6%
- interest on debtor finance	(3.8)	(3.6)	+ 6%
- Other borrowing costs	(2.6)	(2.5)	+ 4%
Total Underlying net borrowing costs:	(12.7)	(12.6)	+ 1%

Key profit and loss outcomes for the year include:

• Continuing sales revenue of $1,029.2m down $17.1m (2%):

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• Rural Services down $43.1m

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• Automotive up $26.0m.

• Discontinuing sales revenue of $9.3m for the period relates to Forestry

• Depreciation and amortisation from continuing operations rose $0.2m (2%) due to higher Automotive D & A, offset in part by lower charges for Rural Services.

• Income from continuing joint ventures and associates was down $3.1m, principally due to Agricultural Land Trust ($1.8m lower), Elders Financial Planning ($0.6m lower following the introduction of client list amortisation), Brilliance JV ($0.3m lower), Kilcoy abattoir ($0.2m lower) and small reductions from a number of other joint ventures.

• Discontinuing income from associates of $(0.5)m relates to the Seedmark joint venture which was divested in April 2012.

• Reported net borrowing costs of $(3.2)m includes:

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• non-recurring net borrowing income of $9.5m includes interest of $10.9m estimated to be payable by the ATO as a result of the successful objection to an amended tax assessment; offset by interest expense of $(1.5)m on finance designated for specific forestry assets that are subject to the current divestment process.

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• underlying net borrowing costs of $(12.7)m, in line with the H1 12 comparative of $(12.6)m. Interest charged on bank debt and debtor finance increased due to higher debt levels.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Cash Flow

$m 6 months to 31 March:	2012	2011
Net operating cash flows	(39.9)	(49.6)
Net investing cash flows	13.4	136.6
Net financing cash flows	7.4	(128.7)
Cash movement	(19.1)	(41.7)

Segment analysis of Operating Cash Flows (Note 13 of 2012 Half Year Report

Rural Services	0.2	(11.0)
Automotive	(0.9)	(0.7)
Forestry	(25.6)	(12.2)
Investment & other (Corporate)	(13.6)	(25.7)

Cash flow from operating activities

Elders’ annual cash flow typically follows a seasonal trend whereby outflow in the first half is offset by the stronger inflows in the second half driven by winter cropping activity.

Cashflow results for H1 12 featured reduced cash outflow in comparison with the pcp as improved flows from Rural Services and corporate offset increased cash outflow from the discontinuing forestry operations:

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• Rural Services’ recorded cash flow from operating activities of $0.2m compared with an outflow of $11.0m in H1 11.

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• Automotive operations generated an operating cash outflow of $(0.9) million compared with $(0.7)m in H1 11.

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• Forestry recorded a cash outflow from operations of $(25.6)m compared with $(12.2)m in the pcp. The higher outflow is due to lower woodchip sales.

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• Investing cashflow of $13.4m resulted from the receipt of cash of $22.1m from sale of forestry properties and $2.7m from sale of investment property; offset by acquisitions in Rural Services and Automotive, expenditure on design and development for new contracts and on Project Connect, which is modernising IT capability through the introduction of a SAP based ERP system.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Balance Sheet and Finance

Balance Sheet: key items
$m as at end:	March 12	Sept 11	March 11
Shareholders’ equity	647.3	604.7	979.5
Cash and cash equivalents	62.5	81.6	38.3
Inventories: current	203.3	188.4	250.8
Assets held for sale	165.9	185.9	7.2
Receivables: current	520.4	540.8	504.7
Receivables: non-current	18.0	16.9	202.7
Property, plant & equipment	83.9	91.3	123.7
Investments in associates & JV’s	83.4	94.1	94.7
Investment properties	-	3.0	261.8
Intangibles	260.3	250.2	260.3
Payables: current	371.7	433.9	420.0
Provisions	122.2	138.4	84.5
Borrowings: current	351.6	196.1	305.3
Borrowings: non-current	84.3	231.0	81.5
Gross borrowings	435.9	427.1	386.8
Net debt	373.4	345.5	361.9
Gearing (%)	58%	57%	37%
NTA per share ($)	0.64	0.55	1.42

Significant movements during the 6 months to 31 March include:

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• Current inventories rose in line with the customary first half seasonal build-up in Rural Services inventory prior to the peak sales period. On a year-on year basis current inventories were reduced by $47.5 million.

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• Assets held for sale of $165.9m were $20.0m lower than at the beginning of the period. Forestry assets account for $159.0m of this figure and the value of forestry assets held for sale was reduced by $22.3m through divestments during the period. Assets held for sale includes a number of assets subject to sales agreements scheduled for settlement in the 2012 second half.

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• Investments in associates and joint ventures reduced by $10.7m largely due to the consolidation of the Anhui automotive joint venture in China.

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• Intangibles rose by $10.1m to $260.3m. The increase is largely due to capitalised expenditure on the development and introduction of a new SAP enterprise resource planning software platform.

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• Current payables were reduced by $62.2m due to Rural Services, principally as a result of lower livestock sales in the period, the cessation of indent wool trading and the timing of live export contracts.

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• Provisions were $16.2m lower, principally due to utilisation of onerous lease provisions, overwhelmingly in respect of Forestry.

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• Gross borrowings were largely unchanged, rising by $8.8m, or 2%, to $435.9m due to cash movements during the period.

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• Current borrowings rose from $196.1 to $351.6m principally through recognition of the December 2012 maturity of Revolver debt facilities of $93.2m and intended second half debt reduction.

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• Net debt rose by $27.9m due to lower cash balance and the higher gross borrowings.

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Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Review of Operations Rural Services

Rural Services Results
$m 6 months to 31 March:	2012	2011	Change
Sales – continuing operations	860.5	903.6	- 5%
Sales - total	860.5	932.3	- 8%
Depreciation & amortisation	3.3	4.2	- 21%
Gross Margin:	156.5	161.0	- 3%
Network: Australia	130.4	136.5	- 4%
New Zealand	10.0	10.5	- 5%
Trading	16.1	14.0	+ 15%
Costs:	(146.8)	(146.4)	0%
Network: Australia	(105.7)	(105.1)	+ 1%
New Zealand	(9.5)	(9.6)	- 1%
Trading	(10.8)	(10.9)	- 1%
Support centres & other	(20.8)	(20.8)	0%
Mark-to-market	5.2	(1.1)	n/m
Network Related Equity Earnings	6.2	6.7	-7%
Underlying EBIT	21.1	20.2	+ 4%
Excluded from underlying EBIT	(1.5)	2.9	n/m
Reported EBIT	19.6	23.1	- 15%
Operating Cash flow	0.2	(11.0)	+ 102%

Sales revenue from continuing operations was down $43.1m (5%):

• Australian network sales revenue up $0.9m:

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• farm supplies up $6.4m

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• livestock agency down $4.8m

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• wool agency up $1.5m

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• real estate down $1.6m

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• banking distribution up $0.4m

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• other network down $1.0m

• New Zealand down $1.9m

• Trading up $7.5m

• Other operations that are in the process of being closed down which do not qualify as discontinued (wool indent trading) were $49.6m lower

Underlying EBIT of $21.1m was up $0.9m:

• Australian network contribution down $6.7m

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• farm supplies gross margin up $1.1m

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• livestock gross margin down $5.2m

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• wool gross margin down $0.8m

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• real estate gross margin down $0.1m

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• bank distribution gross margin up $0.4m

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• grain accumulation and other gross margin down $1.5m

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• network costs up $0.6m.

• New Zealand contribution down $0.4m

• Trading contribution up $2.2m

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• feedlot gross margin up $1.0m

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• live export gross margin up $1.7m

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• wool and other trading down $0.6m

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• costs down $0.1m

• Network Related Equity Earnings down $0.5m

• Balance date mark-to-market of $5.2m was $6.3m higher

• Support centre costs unchanged

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Australian Network

Farm Supplies
$m 6 months to 31 March:	2012	2011	Change
Sales Revenue	449. 6	443.2	+1%
Gross Margin	51.7	50.6	+2%

Increased sales of animal health product, seed and fertiliser other than MAP more than offset the impact of lower prices for fertiliser and Ag Chem.

Falling fertiliser prices encouraged deferral of buying for winter cropping and MAP demand contracted by 33%. Elders’ average fertiliser price for the first half of $671/t was 5% lower than in the pcp.

Increased sales of glyphosate resulted in total AgChem volumes being 1% higher than the pcp despite the lower demand for most lines, particularly insecticide and fungicide, brought by seasonal conditions and flooding in the period.

Livestock Agency
$m 6 months to 31 March:	2012	2011	Change
Sales Revenue	57.7	62.5	- 8%
Gross Margin	41.5	46.7	- 11%

Total cattle and sheep sold contracted by 9%, due to a combination of reduced demand for supply to international markets, high feed availability and the disruption to sale activity brought by flooding and high rainfall in eastern Australia. Livestock agency sales and gross margin contracted due to the reduced sales volumes.

Wool Agency
$m 6 months to 31 March:	2012	2011	Change
Sales Revenue	30.3	28.8	+ 5%
Gross Margin	9.2	10.0	- 8%

Wool agency sales rose due to higher prices during the period. Elders’ average wool price of $1,289/bale was 8% above the pcp average of $1,190/bale /bale. However, lower volume and a higher share of bulk class wool resulted in lower margin generation. The total volume of wool sold of 234k bales compares with 255k bales in the pcp.

Real Estate
$m 6 months to 31 March:	2012	2011	Change
Sales Revenue	23.9	25.5	- 6%
Gross Margin	13.8	13.9	- 1%

Sales and margin results from Real Estate reflect subdued activity levels in broadacre markets and the strategy of transitioning urban-residential-focussed agencies to franchise.

Broadacre property markets remain subdued, with low stock availability and confidence levels. Residential markets have recovered somewhat and Elders’ turnover in this sector is in line with the pcp once allowance is made for the franchising of previously owned agencies.

The resumption of international trade in sheep and emerging concerns about feed availability are expected to result in increased stock being brought to market.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Financial Services
$m 6 months to 31 March:	2012	2011	Change
Gross Margin	10.5	10.1	+4%

Financial services include income generated in the distribution of banking products and cost recovery from the Elders Insurance joint venture for the network role in distribution.

New Zealand Network

New Zealand Key Results
$m 6 months to 31 March:	2012	2011	Change
Sales Revenue	49.8	51.7	- 4%
Gross Margin	10.0	10.5	- 5%
Contribution	0.5	0.9	- 44%

Lower sales and margin generation from New Zealand network operations is largely due to lower wool agency sales. Margin generated by Farm Supplies, Livestock and Insurance increased over the pcp.

Trading

Trading operations include Elders’ livestock, feedlot operations and NZ wool trading.

Trading Key Results
$m 6 months to 31 March:	2012	2011	Change
Sales Revenue	224.2	216.7	+ 3%
Gross Margin	16.1	14.0	+ 15%
Contribution	5.3	3.1	+ 71%

Revenue from trading operations was $7.5m or 3% higher:

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• feedlot trading revenue was $3.4m lower due to lower traded prices.

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• live export revenue rose by $14.3m due to growth in volume shipped to both short haul feeder and long haul breeder markets.

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• wool trading revenue was $3.6m lower due to lower volumes.

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• other trading revenue rose by $0.2m.

The improvement in margin generated is attributable to feedlot and live export operations. Feedlot trading increased its margin generation through greater efficiency in comparison with the pcp, which was adversely affected by unseasonal cool and wet weather. The increase in margin generation from live export is attributable to greater volumes in the Indonesian short haul market.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Network Related Equity Earnings

Equity earnings are recognised in respect of Elders’ network related joint ventures, which include its financial services joint ventures Elders Insurance (25% interest) and Elders Financial Planning (49% interest), the AWH logistics operation (50% interest) and a number of other equity positions in agriculture and network related businesses including Kilcoy abattoir (20% interest) and AuctionsPlus (50%).

Contributions
$m 6 months to 31 March:	2012	2011
Elders Insurance	3.0	3.1
Australian Wool Handlers	2.2	2.2
Other	1.0	1.4
Total Network Related	6.2	6.7

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Automotive

Automotive Financial Results $m 6 months to 31 March:	2012	2011	change
Continuing Sales revenue	168.7	142.7	+ 18%
Underlying EBITDA	15.0	13.8	+ 9%
Depreciation & Amortisation	(9.6)	(9.1)	+ 5%
Underlying EBIT:
Futuris Automotive	5.7	4.7	+ 21%
Associates (equity acc)	(0.3)	0.0	n/m
Underlying EBIT	5.4	4.7	+ 15%
Excluded from underlying EBIT	(1.9)	(0.1)	n/m
Reported EBIT	3.5	4.6	- 24%
Operating cash flow	(0.9)	(0.7)	- 29%
Capital expenditure	4.9	2.5	+96%

Automotive operations comprise 100% owned Futuris and its subsidiaries and joint ventures. During the period the Futuris Automotive Interiors (Anhui) Company Ltd (Anhui) (Futuris interest 70%) was consolidated, after having been equity accounted in previous reporting periods.

Industry conditions featured modest growth rates in vehicle build volumes in Australia, with the increment being principally sourced from the smaller vehicle GM Cruze. Production by Futuris’ customers in China increased.

Sales revenue for the first half rose by $26.0 million, or 18%, with the consolidation of Anhui accounting for $17.2m of this increment. Depreciation and amortisation rose by $0.5m due to the additional charges brought by the consolidation of Anhui.

The balance of the increase is attributable to higher revenue from Australian operations, largely due to the localisation of the GM Cruze.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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Corporate (Investment & Other)

Corporate Financial Results
$m 6 months to 31 March:	2012	2011
Equity accounted income	(1.2)	0.6
Other income	-	0.1
Costs	(4.0)	(3.5)
Underlying EBIT	(5.2)	(2.8)
Excluded from underlying EBIT	(0.3)	(5.6)
Reported EBIT	(5.5)	(8.4)

Corporate and other includes Elders’ corporate operations and investments, including Agricultural Land Trust (497% interest).

Equity accounted income of $(1.2)m recognises Elders’ equity share of the loss recorded by Agricultural Land Trust for the period ($0.6m profit share in H1 11).

The increase in costs for the first half of $0.5m is due to a number of factors including insurance and accrual for long term incentives.

Elders Limited Discussion and Analysis of 2012 First Half Financial Results 21 May 2012

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