ELDERS LIMITED — Management Reports 2012

Nov 18, 2012

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19 November 2012

2012 Financial Results Discussion and Analysis

Attached is the discussion and analysis of the financial results for the 12 month period ended 30 September 2012.

Peter Hastings Company Secretary

1

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FY12 Financial Results Discussion and Analysis Results for the 12 months ended 30 September 2012 19 November 2012

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19 November 2012

2012 Financial Results Discussion and Analysis

This document provides discussion and analysis of Elders Limited’s financial results for the 12 months ended 30 September 2012 as announced to the ASX today.

Calculation of underlying profit

This document and accompanying announcements, such as the FY12 Investor Presentation and 2012 Financial Results Press Release, refer to and discuss underlying profit to enable analysis of like-for-like performance between periods, excluding the impact of discontinued operations or events which are not related to ongoing 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 Group’s external auditors, but is derived from audited accounts by removing the impact of discontinued operations and items unrelated to ongoing operating performance.

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

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, 12 months ended 30 September 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 ongoing operating performance
	Contribution:	earnings before support centre and other costs,
		interest and tax; ie. gross margin less costs
	F/(UF):	favourable/unfavourable variance
	k:	thousand
	m:	million
	n/m:	not meaningful
	Elders:	Elders Limited and/or its subsidiaries
	Company and Group:	Elders Limited and/or its subsidiaries

Previous period comparatives

Previous period comparatives presented in the 2012 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 38 of the 2012 Annual Financial Report.

Where appropriate, prior year comparatives have been amended to provide a like-forlike comparison.

Further Comment:

Further Comment:
Malcolm Jackman	Chief Executive Officer	0439 642 876
Further Information:
Mark Hosking	Chief Financial Officer	0439 833 816
Amy McDonald	Senior Communications Advisor	0419 226 384

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 2

Reconciliation of Statutory and Underlying Profit

The statutory loss after tax attributable to owners of the parent (shareholders) of $(60.6m) for the 12 months ended 30 September 2012 (2011: $(395.4m)) includes a number of items considered either unrelated to ongoing 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 ongoing operations.

Underlying profit is calculated as follows:

Statutory and Underlying Profit
$m after tax 12 months ended 30 September:	2012	2011
Reported profit/(loss) after tax to shareholders	(60.6)	(395.4)
Items excluded from underlying profit:
Rural Services	(10.9)	(22.1)
Automotive	(14.1)	(0.6)
Corporate & other	(8.0)	(46.1)
Forestry	(75.3)	(390.6)
Tax (net)	34.5	55.0
Items excluded from underlying profit	(73.8)	(404.4)
Underlying profit/(loss) after tax to shareholders	13.2	9.0

Items excluded from statutory profit to determine underlying profit for the 12 months ended 30 September 2012 comprise:

• Rural Services related items of $(10.9m) before tax includes the results from discontinued operations (BWK and Seedmark) $(2.2m), asset impairments $(3.8m) and the back-office restructure $(3.0m) to reset the cost base for ongoing benefits from 2013.

• Automotive related items of $(14.1m) before tax includes redundancies and restructure of some Victorian facilities $(3.7m), onerous contracts $(6.0m) and asset impairments $(10.1m), which were partly offset by a fair value adjustment of $5.7m arising from consolidation of the Anhui joint venture in China.

• Corporate items of $(8.0m) before tax, which principally comprise:

• asset impairments $(19.6m) relating to investments in Aspen, AFC and Agricultural Land Management, and

• interest received from the ATO of $19.2m as a result of the successful objection to an amended tax assessment, partly offset by finance costs $(5.6m) relating to funding for designated forestry assets.

• Forestry items of $(75.3m) before tax includes gain on disposal of assets $27.3m, asset impairments $(44.1m), provisions for exit costs and for onerous contracts $(36.0m), equity accounted loss from Agricultural Land Trust $(5.3m) and results from discontinued forestry operations for the period $(17.2m).

• Tax items excluded from underlying profit $34.5m, which relates to:

• gain of $55.5m from the reversal of provisioning and amounts received in respect of the amended tax assessment successfully contested,

• reduction in deferred tax assets $(26.7m) from utilisation and de-recognition of tax losses, and

• $5.7m tax effect of other items, which are excluded from underlying profit before tax.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 3

Reported and Underlying Profit measures

	Profit: Reported and Underlying
	$m 12 months ended 30 September:		2012	2011	F/(UF)
	Underlying EBIT		38.8	32.4	20%
	Net underlying finance costs		(20.7)	(18.5)	-12%
	Underlying profit/(loss) before tax		18.1	13.9	30%
	Tax on underlying profit/(loss)		(1.7)	(1.6)	-6%
	Non-controlling interests		(3.2)	(3.3)	3%
	Underlying profit/(loss) to shareholders		13.2	9.0	47%
	Items excluded from underlying profit/(loss)	1	(73.8)	(404.4)	82%
	Reported profit/(loss) after tax to shareholders		(60.6)	(395.4)	85%
	Earnings per share (cents)
	- reported basic		(13.5)	(88.1)
	- reported diluted		(13.5)	(88.1)
	- underlying basic		2.9	2.0
	- underlying diluted		1.2	1.0
1	Items excluded from underlying profit are detailed on	page	3 of this	document

Analysis of movement in profit before tax

Profit Movement Analysis
$m 12 months ended 30 September:
FY11 Reported profit/(loss) before tax		(444.6)
FY11 Items excluded from underlying profit/(loss) before tax		458.5
FY11 Underlying profit/(loss) before tax		13.9
Change in FY12 from:
Rural Services EBIT	4.6
Automotive EBIT	1.7
Corporate & other EBIT	0.1
Change in underlying EBIT		6.4
Change in underlying finance costs		(2.2)
FY12 Underlying profit/(loss) before tax		18.1

Underlying profit before tax rose by $4.2m in comparison with pcp due to:

• Increase in underlying EBIT by $6.4m:

• Rural Services EBIT up $4.6m due to increased earnings generated from Trading operations, New Zealand, Associates and favourable mark-to-market movements, which partly offset reduced earnings from Network operations.

• Automotive EBIT up $1.7m with reduced costs offsetting lower margins.

• Corporate and other EBIT improved by $0.1m.

• Net underlying finance costs up $2.2m as detailed on page 5.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 4

Key Profit and Loss Items

Key profit and loss items for the year include:

• Continuing sales of $2,157.9m, which were down 5% or $(105.2m):

Key Profit & Loss items

Key Profit & Loss items	Key Profit & Loss items
$m 12 months ended 30 September:	2012 2011 F/(UF)
Sales revenue
- Continuing operations	2,157.9 2,263.1 -5%
- Discontinued operations	14.7 95.6 n/m
Total sales revenue	2,172.6 2,358.7 -8%
Depreciation & amortisation
- Continuing operations	21.0 23.7 11%
- Discontinued operations	- 3.7 n/m
Total depreciation & amortisation	21.0 27.4 23%
Income from associates
- Continuing operations	8.3 12.0 -31%
- Discontinued operations	(0.5) (8.8) n/m
Total income from associates	7.8 3.2 144%
Net finance costs
Interest on core debt (gross)	(22.5) (27.1) 17%
Interest excluded for assets being divested	5.6 10.8 -48%
- Underlying interest on core debt	(16.9) (16.3) -4%
- Interest on self-liquidating facilities	(7.9) (7.2) -10%
- Other finance costs and interest income (net)	4.1 5.0 -18%
Underlying net finance costs	(20.7) (18.5) -12%
Excluded from underlying finance costs	12.2 (37.1) n/m
Total net finance costs	(8.5) (55.6) 85%

• Rural Services sales were down $(134.7m), of which $(97.7m) related to operations that were wound down in 2012 (wool indent trading).

Strong performance from live cattle exports and increased sales of farm supplies were offset by the impact of reduced prices on sales in wool, livestock, feedlots and broadacre real estate.

• Automotive sales were up $29.5m. Sales increased $11.4m in Thailand with the first full year of operations, which were offset by the impact of lower Australian vehicle build volumes $(11.4m). The consolidation of the Anhui joint venture increased sales by $29.5m in 2012.

• Discontinued sales revenue of $14.7m for the year relates to Forestry.

• Depreciation and amortisation from continuing operations declined $2.7m as a result of lower charges in both Rural Services and Automotive.

• Income from continuing joint ventures and associates was down $(3.7m), principally due to Agricultural Land Trust $(6.5m), which offset increased contributions from Kilcoy abattoir (up $2.0m) and AWH logistics operations (up $1.3m).

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

• Reported net finance costs of $(8.5m) includes:

• Underlying net finance costs of $(20.7m) comprising:

  • underlying interest on core debt (2012: $(16.9m); 2011: $(16.3m) that excludes interest to finance specifically designated assets being divested (detailed below). Total interest on core debt of $(22.5m) was $4.6m lower than pcp due to reduced core debt levels and a decline in interest rates,

  • interest on self-liquidating facilities was up on pcp as a result of higher amounts securitised, partly offset by lower interest rates, and

  • other finance costs and interest income largely relate to facility fees, and interest income on overdue debtors and from advances to associates.

• The $12.2m excluded from underlying finance cost, primarily relates to:

  • interest of $19.2m received from the ATO as a result of the successful objection to an amended tax assessment,

  • interest expense related to finance designated for assets being divested (2012: Forestry $(5.6m); 2011: Rural Bank $(2.8m), Forestry $(8.0m)), and

  • $(26.0m) costs in 2011 relating to repayment of USPP debt and refinancing.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 5

Cash Flow

Operating cash flow

	Cash Flow
	$m 12 months ended 30 September: 2012 2011
	Operating cash flow 2.5 (23.8)
	Investing cash flows 51.8 133.8
	Financing cash flow (44.0) (108.4)
	Total cash flow 10.3 1.6

By Segment	Group Total	**Forestry **	Total ex Forestry	Rural Services	Auto	Corporate
Operating cash flow (2012)
- before working capital	95.8	(14.8)	110.6	52.4	48.4	9.8
- working capital movement	(93.3)	(41.2)	(52.1)	(3.0)	(24.1)	(25.0)
Total operating cash flow	2.5	(56.0)	58.5	49.4	24.3	(15.2)

Positive cash generation from Rural Services and Automotive more than offset the cash outflow from Forestry.

Rural Services, Automotive and Corporate generated cash inflows of $110.6m prior to working capital movements of $(52.1m). Features of operating cash flow include:

• Rural Services’ recorded cash inflow from operating activities of $52.4m prior to working capital movements of $(3.0m). This was driven by strong performance from Live Export Trading.

• Automotive operations generated an operating cash inflow of $48.4m before working capital movements of $(24.1m).

• Corporate recorded a cash inflow of $9.8m before working capital movements, mainly due to receipt of $46.8m from the ATO for refund of tax and interest following the successful objection to an amended tax assessment, partly offset by finance costs. Working capital movements of $(25.0m) relates primarily to the Rural Services debtor finance program.

Forestry recorded cash outflow of $(14.8m) before asset related payments. Working capital movement $(41.2m) comprises payments associated with maintaining assets held for sale, in particular lease obligations prior to sale.

Investing cash flow

Investing cash flow of $51.8m in 2012 includes receipts of $101.4m from Forestry asset sales. This was offset by capital expenditure of $(32.3m) by Automotive on design and development for new contracts and expansion in Thailand and USA, and $(18.3m) by Rural Services to modernise IT capability through a SAP based ERP system (project on hold in the short term, in light of the Rural Services sale process).

Investing cash inflow of $133.8m in 2011 included $163.9m proceeds from the sale of equity accounted investment in Rural Bank.

Financing cash flow

Financing cash flow of $(44.0m) is mainly the result of term debt net repayment of $100.4m with the proceeds from Forestry asset sales and receipt from the ATO, partly offset by an increase of $59.7m in the usage of the self-liquidating facilities secured by farm supplies and automotive receivables.

Financing cash flow of $(108.4m) in 2011 was primarily the result of net repayment of debt from scheduled pay-downs and refinancing, which offset inflows from new facilities.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 6

Balance Sheet and Finance

	Balance Sheet: key items
	$m as at end: Sep 12 Mar 12 Sep 11
	Assets and Liabilities: key items
	Inventory and livestock 234.4 263.2 241.6
	Trade and other receivables 498.0 520.4 540.8
	Trade and other payables (386.6) (371.7) (433.9)
	Working Capital 345.8 411.9 348.5
	Assets held for sale 71.5 165.9 185.9
	Property, plant and equipment 95.7 83.9 91.3
	Investments 80.5 83.4 97.1
	Intangibles 277.3 260.3 250.2
	Provisions (146.0) (122.2) (138.4)
	Net Debt and Equity:
	- Borrowings - current: self-liquidating facilities 199.2 134.7 139.5
	- Borrowings - current: core debt 1 103.8 216.9 56.5
	- Borrowings - non current: core debt 1 82.8 84.3 231.0
	- Debt related financial derivatives 1.5 - -
	- Cash and cash equivalents (92.0) (62.5) (81.6)
	Net debt 295.3 373.4 345.4
	Shareholders' equity 551.8 647.3 604.7
	- Gearing % - core net debt / equity 17.4% 36.9% 34.1%
	- Gearing % - self-liquidating facilities / equity 36.1% 20.8% 23.1%
	Gearing % - net debt / equity 53.5% 57.7% 57.1%
	NTA per share $ 0.40 0.64 0.55

1 Core debt = total debt less self-liquidating facilities

Assets and liabilities

Significant movements during the 12 months to 30 September 2012 include:

• Working capital was $2.7m lower, as a result of reductions in inventory $7.2m, receivables $42.8m and payables $47.3m.

• Inventory and livestock were reduced by $7.2m, primarily in Rural Services, due to management focus on reducing farm supplies inventories and reduction in wool stocks from the wind down of wool indent trading, which were partly offset by higher cattle numbers at balance date following an increase in live export shipments.

• Receivables were $42.8m lower, mainly in Rural Services, as a result of reduced livestock agency turnover $35.1m and timing of live export shipments $20.1m. This was partly offset by higher receivables in Automotive from consolidating the Anhui JV.

• Payables declined by $47.3m as a result of lower livestock turnover.

• Assets held for sale of $71.5m relates predominantly to Forestry. The decrease of $114.4m was driven by forestry asset sales $74.1m and asset impairments $44.1m.

• Investments in property, associates and joint ventures reduced by $16.6m largely due to the consolidation of the Anhui automotive joint venture in China, equity accounted loss from the Agricultural Land Trust, and sale of the BWK property in Bremen.

• Intangibles increased by $27.1m largely as a result of $10.8m goodwill on consolidation of the Anhui JV and $18.3m expenditure to modernise IT capability through a SAP based ERP system (project on hold in the short term, in light of the pending sale of the Rural Services business).

• Provisions increased by $7.6m as a result of resetting of provisions related to the forestry divestment program.

Indebtedness

Net debt reduced by $50.1m in 2012, with gearing lower at 53.5%. Borrowings include:

• Self-liquidating finance facilities of $199.2m (2011: $139.5m), which are securitised by farm supplies and automotive receivables.

• Core net debt of $96.1m, which reduced from $205.9m in 2011, and now accounts for 33% (pcp 60%) of net debt. The reduction was reflected principally in Term debt that reduced from $180.9m to $88.1m. Proceeds from Forestry asset sales and ATO receipt were applied to repay core debt.

At the date of this report, the Group has received in principle funding agreement from its financiers, subject to credit approvals, which provide for the continuation of funding and the provision of incremental facilities through to the anticipated withdrawal from Forestry and intended sale of Automotive and Rural Services.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 7

Review of Operations Rural Services

	Rural Services
	$m 12 months ended 30 September: 2012 2011 F/(UF)
	Sales revenue 1,813.2 1,986.1 -9%
	- Continuing operations 1,813.2 1,947.9 -7%
	- Discontinued operations - 38.2 n/m
	Depreciation & amortisation 6.4 8.4 24%
	- Continuing operations 6.4 7.1 10%
	- Discontinued operations - 1.3 n/m
	Gross margin 314.2 322.7 -3%
	- Network: Australia 257.7 276.8 -7%
	- New Zealand 16.9 18.1 -7%
	- Trading 39.6 27.8 42%
	Costs (304.4) (301.9) -1%
	- Network: Australia (220.6) (217.8) -1%
	- New Zealand (18.4) (21.0) 12%
	- Trading (22.0) (20.7) -6%
	- Support centres & other (43.4) (42.4) -2%
	Mark-to-market 5.6 (7.2) n/m
	Equity earnings 14.1 11.3 25%
	Underlying EBIT 29.5 24.9 18%
	Items excluded from underlying EBIT (10.8) (20.7) 48%
	Reported EBIT 18.7 4.2 n/m
	Operating cash flows 49.4 59.5 -17%

Rural Services underlying EBIT rose, despite difficult seasonal and market conditions faced by the agribusiness sector that impacted volumes and prices, due to favourable balance date mark-to-market adjustment and strong rebound from Trading operations.

After the promising start brought by widespread rainfall, most agricultural regions across eastern, southern and western Australia encountered below average to significantly below average rainfall during the second half of the year, causing crop downgrades and feed availability concerns. Tight liquidity and challenging market conditions were reflected in weaker demand for farm supplies, lower sheep and wool prices and subdued broadacre real estate markets. Demand for livestock, especially for breeder stock for dairy and beef cattle, continued to remain strong although the strong AUD/USD rate affected Australia’s export competiveness in global markets.

Sales from continuing operations were down 7% to $1,813.2m with strong performance from Trading, principally live cattle exports, offsetting lower agency sales in livestock, wool and broadacre real estate. Sales of farm supplies increased 2% to $1,045.0m despite lower demand for crop inputs and reduced prices.

Gross margin was 3% lower, with the significant improvement from Trading being offset by the impact of lower agency sales across both the Australian and New Zealand operations.

• Most of the $11.8m (42%) increase in Trading margin related to the Live Export business $11.3m, which increased volumes 28% in the long haul breeder export trade, and lifted short haul export volumes 23% following the significant disruption over the previous two years. Feedlot operating margins were also higher.

• Lower agency commission $(18.8m) accounted for virtually all of the decline in network margins, with the largest decreases in livestock $(11.7m) as a result of the sharp fall in sheep prices (down 13% year-on-year) and lower volume. Wool $(3.2m), Real Estate $(1.3m) and Banking distribution $(0.9m) were other areas of shortfall.

• Improved NZ results in Livestock $0.7m and Farm Supplies were more than offset by lower earnings in Wool $(2.1m) where weak demand and reduced prices affected volumes and margins.

The focus on costs restricted the overall increase year-on-year to 0.8%. In August, the company implemented a cost reset of the back office functions resulting in a 25% head count reduction that will deliver on-going benefits from 2013.

Favourable mark-to-market gain of $5.6m in 2012 reversed unrealised losses in 2011 as a result of the rebound in the AUD/USD.

Equity earnings of $14.1m were up $2.8m on 2011, with increased contributions from Kilcoy $2.0m, AWH $1.3m and Elders Insurance $0.2m, offset by a lower result from Elders Financial Planning $(0.7m).

Underlying EBIT of $29.5m was up $4.6m or 18% above last year.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 8

Australian Network

	Australian Network
	$m 12 months to 30 September: 2012 2011 F/(UF)
	Farm Supplies
	- Sales Revenue 1,045.0 1,023.9 2%
	- Gross Margin 114.6 114.8 0%
	Livestock Agency
	- Sales Revenue 103.1 115.3 -11%
	- Gross Margin 74.3 86.0 -14%
	Wool Agency
	- Sales Revenue 50.6 55.8 -9%
	- Gross Margin 15.5 18.7 -17%
	Real Estate
	- Sales Revenue 49.1 52.3 -6%
	- Gross Margin 26.7 28.0 -5%
	Banking Distribution
	- Sales Revenue 20.5 21.2 -3%
	- Gross Margin 20.3 21.2 -4%
	Others
	- Sales Revenue 7.1 8.1 -12%
	- Gross Margin 6.3 8.1 -22%
	Total Network: Australia
	- Sales Revenue: Underlying 1,275.3 1,276.5 0%
	- Gross Margin: Underlying 257.7 276.8 -7%

Australian Network

• Farm Supplies : Demand was weak, especially for crop inputs, from average to significantly below average rainfall in the second half. Despite this, sales from farm supplies increased 2%, with the uplift in Fertiliser (up 2%), Animal Health and other farm supplies (up 7%) more than offsetting lower sales (down 3%) in AgChem. Overall margins were in line with last year.

• Livestock Agency : Limited restocker activity from drier conditions, increased supply and export regulations saw sheep prices fall sharply in 2012, with the ESTLI down 23% (388c/kg vs 506c/k). Cattle prices were also lower with EYCI down 9% in 2012 (360c/kg vs 393c/kg). As a result, sales and margin were down on 2011.

• Wool Agency : Weak economic activity in the European Union and slow economic growth in USA has continued to dampen retail wool demand, with a strong AUD placing downward pressure on prices. Sales and margins were lower as a result of reduced prices and volumes, arising from marginally lower production and higher on-farm inventory.

• Real Estate : Rural property markets continue to remain soft with turnover down 16% from 2011. However, the gradual and slow improvement in regional markets saw a small rise in regional residential sales, which partly offset lower broadacre.

• Banking Distribution income was lower as a result of reduced loan and deposit balances with farmers more cautious in the current economic environment.

• Other revenue of $7.1m includes income from accumulation of grain and cost recovery from the Insurance and Financial Planning joint ventures.

New Zealand Network

	New Zealand
	$m 12 months ended 30 September: 2012 2011 F/(UF)
	- Sales Revenue 80.7 91.3 -12%
	- Gross Margin 16.9 18.1 -7%
	- Costs (18.4) (21.0) 12%
	- EBIT Underlying (1.5) (2.9) 48%

New Zealand operations recorded a smaller loss in 2012 compared to 2011 with lower costs more than offsetting reduced margins.

The lower sales and margins were mainly in wool (as a result of weak global demand and strong NZ$), partly offset by increased margins in livestock and farm supplies.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 9

Trading

Trading operations include contribution from International cattle, beef and wool trading platforms as well as in-country Indonesian & China operations and domestic feedlots.

Trading

	$m 12 months ended 30 September:	2012	2011	F/(UF)
	- Sales Revenue	446.7	471.9	-5%
	- Gross Margin	39.6	27.8	42%
	- Costs	(22.0)	(20.7)	-6%
	- EBIT Underlying	17.6	7.1	148%

• Sales : Increase in live cattle export sales were offset by reduced throughput in the feedlots and lower cattle prices. Elders live cattle export volumes were 25% higher than in 2011 (167,383 head vs 133,608 head) with increases in both short haul (up 23%) and long haul (up 28%) volumes due to the strength of dairy and beef breeding markets (China, Russia) and resumption of feeder cattle trade into Indonesia.

• Margins were up 42% to $39.6m as a result of the rebound of live cattle exports and significantly improved profitability of the feedlots.

Equity Earnings

Equity earnings are recognised for Elders’ 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 other equity positions in agriculture including Kilcoy abattoir (20% interest) and Auctions Plus (50%).

The 25% rise in equity earnings of $2.8m related principally to AWH $1.2m from higher logistics income resulting from a record cotton crop, and Kilcoy $1.9m with return to more normal trading returns.

	Equity Earnings
	$m 12 months to 30 September: 2012 2011 F/(UF)
	Australian Wool Handlers 5.3 4.1 29%
	Elders Insurance 6.5 6.3 3%
	Kilcoy Pastoral Co 1.7 (0.2) n/m
	Others 0.6 1.1 -45%
	Total Equity Earnings 14.1 11.3 25%

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

Page 10

Automotive

	Automotive
	$m 12 months ended 30 September: 2012 2011 F/(UF)
	Sales revenue
	- Continuing operations 344.7 315.2 9%
	Depreciation & Amortisation
	- Continuing operations 14.6 16.6 12%
	Profit and loss
	Gross Margin 64.6 66.4 -3%
	Costs 1 (45.5) (49.1) 7%
	Equity earnings (0.6) (0.5) -20%
	Underlying EBIT 18.5 16.8 10%
	Items excluded from underlying EBIT (14.1) - n/m
	Reported EBIT 4.4 16.8 -74%
	Operating cash flows 24.3 15.4 58%
	Capital expenditure 32.3 12.3 163%

1 FY11 costs exclude $1.5m head office management fees, consistent with FY12

Automotive operations comprise 100% owned Futuris Automotive and its subsidiaries and joint ventures. During the year, 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. Federal and State co-investment with GM have secured the build of two all-new cars in Australia in the second half of this decade, with the future of Ford Falcon being secured for another four years and Toyota recently committed to continue to build passenger cars, including hybrid models, in Australia.

Chinese vehicle production and sales were subdued, and the Chinese government has moved to exclude foreign car brands from vehicle purchases by state agencies to boost local production.

Thailand is becoming a global production centre for automobile manufacture, with Futuris Automotive commencing production in 2012 of both Ford (Focus) and GM (Holden Colorado) at the recently established plant facilities in Thailand.

Futuris Automotive has also commenced supply of seats in North America to Tesla.

Sales revenue rose by $29.5 million, or 9%. Sales increased $11.4m in Thailand with the first full year of operations, which were offset by the impact of lower Australian vehicle build volumes $(11.4m). The consolidation of the Anhui joint venture increased sales by $29.5m in 2012.

Joint ventures and associates contributed a loss of $(0.6m), slightly lower than in the previous years due to lower vehicle build volumes.

Underlying EBIT was $18.5m compared with $16.8m in the previous year. The increase of $1.7m was the result of reduced costs which offset the lower margins.

Items excluded from underlying EBIT are as detailed in page 3.

The global expansion of Futuris Automotive in Thailand and North America, together with consolidation of the Campbellfield operations in Victoria, contributed to the higher capital expenditure in 2012.

The business is in the process of being sold, however is not held for sale at 30 September 2012.

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

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Corporate (Investment & Other)

	Corporate - Investment & Other
	$m 12 months ended 30 September: 2012 2011 F/(UF)
	Depreciation & Amortisation
	- Continuing operations 0.01 0.01 0%
	Profit and loss
	Income 0.5 0.8 -37%
	Costs 1 (9.7) (10.1) 4%
	Underlying EBIT (9.2) (9.3) 1%
	Items excluded from underlying EBIT (21.5) (10.1) -113%
	Reported EBIT (30.7) (19.4) -58%
	Operating cash flows (15.3) (70.5) 78%

Corporate (investment & other) includes Elders’ corporate operations and investments.

EBIT improved by $0.1m. Cost reductions in 2012 were offset by lower earnings $(0.3m), foreign currency movements $(0.5m) and accrual for long term incentives.

Items excluded from underlying EBIT of $(21.5m) includes $(19.6m) asset impairments relating to Aspen, AFC and Agricultural Land Management.

1 FY11 costs exclude $1.5m management fees to Automotive, consistent with FY12

Elders Limited Discussion and Analysis of 2012 Full Year Financial Results

19 November 2012

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