Coal squeezes out Wesfarmers’ profit
Wesfarmers' (ASX:WES) disparate collection of businesses, including supermarkets, insurance, chemicals, hardware, office supplies and coal, has posted a smaller than expected rise in full-year profit.
The diversified company yesterday reported a net profit of $1.565 billion, up 2.8 per cent, on revenue of $51.8 billion, which was up 1.7 per cent for the year.
The hard work poured into turning around Coles was countered by a slump in coal prices and steeper resource royalty payments but the conglomerate says its outlook is encouraging.
Chief executive Richard Goyder said he remained strongly wedded to the strengths and benefits of the conglomerate model and had no plans to spin off supermarkets or make any other divestments.
He said to declare a higher profit than in 2008/09 was pleasing given the drop in the company's resources division due to lower coal prices for most of the year.
According to him, eight of the company's 10 reporting divisions improved their return on capital last year, and the result was ''quite gratifying.''
Diversification allowed Wesfarmers to increase profits even with a weaker performance by the resources unit, CMC Markets analyst David Taylor said.
"The retailer is clearly generating growth through its Coles and Bunnings businesses."
Wesfarmers said Coles continues to make progress on its turnaround program, with 15.8 per cent growth in earnings.
Bunnings stayed on its 15-year track of double-digit growth, with earnings improving 10.5 per cent to $728 million.
Meanwhile, earnings from the resources unit declined 81.4 per cent due to "materially lower global export coal prices in the first nine months", a higher royalty expense and other costs.
But Mr Goyder said the coal price outlook, compared to prices in place at the start of the 2010 financial year, was positive and that they are well placed to take advantage of growth opportunities and higher export.
Wesfarmers will pay a 70¢ fully franked final dividend on September 30. The shares gained 15¢ to $31.95.