AACo, Elders hit in live export ban

Bad news in a poor market, it’s every listed company’s worst nightmare.

Sometimes the news is self-inflicted and relates directly to the company’s performance, and other times the company can just be unlucky — like uranium companies during the Japanese tsunami, and agricultural companies in the live cattle export debacle that has surfaced.

No matter what the trigger, the result is always the same.

I know the live cattle export debacle is being covered to death at the moment, but what makes it worse for the share prices of the affected companies listed on the ASX is the fact this is occurring in a weak general market.

The two companies that spring to mind here are the Australian Agricultural Company (AACo) and Elders, but there are numerous other companies with exposure listed on the ASX.

It was in early May in this column when I pointed out that AACo was raising capital to pursue its strategic plan and reduce debt levels.

Capital was being raised at $1.42/share, which was a 9 per cent discount to the market at the time. Since then the general market is off 5 per cent, and AACo is trading very close to the price where it raised capital, closing at $1.43 last Friday.

The sting in the tail is that as a result of this live export ban to Indonesia, AACo went into a trading halt last week and issued a profit downgrade.

The company’s 2011 earnings before interest, tax, depreciation and amortisation (EBITDA) is now expected to be “in the range” of $50 million to $60 million, compared with a previous estimate of between $60 million and $65 million.

While AACo has been taking all the heat in the press, Elders has made no announcements regarding the impact on the live export ban on its 2011 forecasts.

According to the Elders website, its exports to South-East Asia are facilitated through the North Australian Cattle Company (NACC) based in Darwin.

NACC link supply of Australian feeder, slaughter and breeder cattle to demand throughout Asia, including the 100 per cent Elders’ owned PT Elders Indonesia.

So we’ll be watching this space closely for an update from Elders over the coming weeks.

By that time the damage may already be done, with the Elders share price last week drifting 3.5c (8 per cent) lower to finish at 42.5c/share.

From here there is not much more that Elders and AACo can do as companies to help their share prices other than play a straight bat, keep the market up to date, and stay focused on their long-term strategy.

The market will respect them for that.