12/11/2015 - 13:20

Coal losses hurt Wesfarmers

12/11/2015 - 13:20

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Wesfarmers' incoming chairman Michael Chaney will inherit challenging conditions in the conglomerate's industrial and resources division, but continued solid earnings from its retail businesses including Coles and Bunnings.

Wesfarmers directors Bob Every, Richard Goyder (centre) and Michael Chaney at today's AGM. Photo: Attila Csaszar

Wesfarmers' incoming chairman Michael Chaney will inherit challenging conditions in the conglomerate's industrial and resources division, but continued solid earnings from its retail businesses including Coles and Bunnings.

Bob Every handed over the chair at today's annual general meeting to Mr Chaney, who previously led Wesfarmers as managing director.

Current managing director Richard Goyder said the conglomerate's largest business, Coles, had made a strong start to the 2016 financial year.

He said ongoing investment in lowering food and grocery prices and better customer service was increasing transaction volumes and leading to bigger basket sizes.

The group's other retailers, Officeworks, Kmart and Target are also meeting expectations.

However the industrial division, which includes coal mines, was under pressure largely due to weak coal export prices, Mr Goyder said.

"Our portfolio of businesses overall, is tracking to expectations, with good momentum in our retail divisions being offset by the performance of our industrials division, notably the difficult trading experienced in our resources business," he said.

Mr Goyder said weak coal prices were adversely affecting the performance of its Queensland mines.

"The outlook for the 2016 financial year therefore remains challenging and we expect our resources business to be loss making at the earnings before interest and tax (EBIT) level this year," he said.

"Given the acute cost pressures faced by Australian miners and oil and gas producers, the trading environment for our industrial and safety business also remains challenging, with ongoing margin pressure."

He said Target's transformation, the group's weakest performing retailer, was making satisfactory progress.

"Customers are responding favourably to the investment made in higher quality, lower prices, every day," Mr Goyder said.

"The focus will continue to be on the customer ... both in-store and online, and investing in lower prices as Target makes fashion, style and quality more affordable for the whole family."

Mr Every said he had confidence in the Wesfarmers’ conglomerate structure.

"In recent weeks I have been involved in a series of investor briefings with Michael Chaney, and I agree with his observation that Wesfarmers has been successful because it is a conglomerate, and not despite being a conglomerate," Mr Every said.

As a conglomerate, if we are not financially strong and successful, with a focus on our returns to shareholders, we cannot survive, prosper and do the many good things in the community we like to do."

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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