Goyder keeping a close eye on assets

IT may be a subtle shift, but a couple of moves at Wesfarmers’ management team offer a signal the Coles integration is going to plan and that attention is returning to other parts of the business, especially the volatile coal assets.

The most intriguing element is news that Wesfarmers Resources managing director Stewart Butel has become a direct report to group managing director Richard Goyder.

Wesfarmers Resources, which is the conglomerate’s coal operations, has been out of Mr Goyder’s direct radar for more than a year and a half, one of several divisions that were put in the hands of former executive Keith Gordon.

From July 2008, Mr Gordon headed four divisions, bundled up under the title ‘industrial divisions’, which had previously reported directly to Mr Goyder. The intention was to allow the Wesfarmers chief to better devote his time to the integration of Coles and other retail assets, including major retail brands such as Office Works, Target and Kmart.

Mr Gordon quit in November to run listed yellow-goods player Emeco Holdings.

Three of those divisions – industrial and safety, chemicals and fertilisers, and energy – have now become the responsibility of Wesfarmers finance director Terry Bowen, who has previously run industrial and safety.

The market has been pleasantly surprised by the performance of Coles, prompting a refocus on the growth of archrival Woolworths, which disappointed investors last month with half-yearly sales growth of just 4.2 per cent when petrol was excluded.

In other retail-focused news, Wesfarmers also announced this week the establishment of a management committee to ensure coordination between Kmart and Target on strategic issues, property matters, human resources and other areas of common interest.

Target managing director Launa Inman will chair the new committee, which will include Kmart managing director Guy Russo, Mr Bowen, and chief human resources officer Ben Lawrence.

The changes were all part of a package of announcements this week headed by the arrival of Allens Arthur Robinson partner Paul Meadows, who will join the management team as group general counsel.

Mr Meadows, who will be based in Melbourne, has a background in commercial litigation and has specialised in advising big listed companies.

His arrival does have some fallout.

His wife, Patricia Cross, is a long-standing director of Wesfarmers and one of two women on the board, including recent recruit Diane Smith-Gander.

Ms Cross will step down from the board in March as a result of the appointment of Mr Meadows, due to the potential for a conflict of interest.

Market watchers sense that the key move in the low-key musical chairs is that of Mr Butel’s new reporting line directly to Mr Goyder.

Wesfarmers Resources has a huge capital investment program and its impact on the business is quite volatile due to the nature of the coal-focused division.

Last year, with earnings of $915 million from revenue of $2.41 billion, it was the biggest divisional contributor to earnings before interest and tax, representing 28 per cent, ahead of Coles’ 25 per cent.

But the rising Australian dollar and fluctuating coal prices are likely to change this significantly.

“He (Mr Goyder) wants to be closer because of the chunky capital costs and how much it can have a big impact on group earnings,” one market watcher said, pointing out that the vital coal price-negotiating period would begin shortly.

Late last year, Wesfarmers announced the $286 million expansion of the coal production capacity from its Curragh mine in Queensland’s Bowen Basin to increase production up to 8.5 million tonnes per annum.

There may also be opportunities in Western Australia with the financial problems at the parent of local competitor, Griffin.