The Elders Ltd (ASX: ELD) share price has started the week with a bang.
In morning trade, the agribusiness company's shares have jumped 11% to a decade-high of $13.34.
Image source: Getty Images
Why is the Elders share price surging higher?
Investors have been bidding the Elders share price higher today after responding positively to a trading update.
According to the release, Elders revealed that it expects its underlying earnings before interest tax (EBIT) to increase 20% to 30% in FY 2022. Management notes that this outlook exceeds the market expectations based on the mid-point of the earnings expectations of sell side analysts covering the company.
Elders' Managing Director and CEO, Mark Allison, commented: "Elders' performance so far in our financial year 2022 has been strong and exceeds our performance after the first five months of FY21. After finalisation of the February trading numbers, which continue improved earnings for the first quarter, we now believe we will exceed analysts' consensus for the full year to 30 September 2022 and produce an Underlying EBIT result in the range – which is necessarily broad given we are only five months into our financial year."
What is driving its strong form?
The release explains that Elders has experienced an improvement in its Retail and Wholesale segments compared with the same time last year. This is due to increased sales and favourable seasonal conditions in most parts of Australia.
And while management acknowledges that some of these sales are forward purchases by primary producers seeking to mitigate the risk of instability in supply chains, it still considers the majority of sales are a result of increased activity.
In addition, the company's Agency business continues to perform strongly as a result of high prices in both sheep and cattle. This is being offset slightly by lower volumes due to restocking and the good availability of feed on farm. Real Estate is also exceeding expectations due to increased turnover and high demand.
All in all, FY 2022 looks set to be a very positive year for Elders.
