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Profit report shows life’s a gas at Wesfarmers

THE good news was flowing freely at Wesfarmers’ annual profit announcement this week, with managing director Michael Chaney speaking positively about the company’s prospects and the State Government’s policies.

Western Australia’s biggest company reported a record net profit of $538.2 million for the year ended June 30 2003.

Excluding a one-off profit from the sale of the Girrah coal deposit in Queensland, net profit rose 16.4 per cent to $481.9 million.

Mr Chaney said he was “very pleased” with the result, which came in a “tough year”.

Last year’s negatives included the drought, which adversely affected the company’s rural services and fertiliser businesses, and the resumption of superannuation contributions, which amounted to about $25 million.

Mr Chaney indicated that Wesfarmers had plenty of scope to make further acquisitions, including possibly the Dampier to Bunbury gas pipeline if its current owner, Epic Energy, put it up for sale.

He defended the Government over its handling of gas tariffs, saying it had been “absolutely right” in its decision to not intervene, despite strong criticism of the Office of Gas Access Regulation.

“The people who bid were fully aware of the regulatory conditions, they were clearly set out,” Mr Chaney said.

“If you depart from that, you create sovereign risk.”

Mr Chaney said he was “pretty comfortable” with the energy reform process under way in WA and concluded that the proposed reforms would deliver “adequate competitive opportunities”.

Wesfarmers is a player in the WA energy market though its Premier Coal subsidiary.

Premier, and second Collie coal mining company Griffin Coal, have lodged expressions of interest to build a new 330-megawatt baseload power station for Western Power.

Mr Chaney said he had always believed that the next baseload station should be coal-fired.

Looking ahead, Mr Chaney said $2 billion provided a “rule of thumb” as to the amount that Wesfarmers could spend on acquisitions.

An acquisition of this size would return the group’s net debt to equity ratio, which is currently 23.7 per cent, back to its target level.

The recovery from the drought was expected to bolster earnings this year.

Mr Chaney said he expected improved earnings from all divisions except energy, which would be affected by a fall in export coal prices and the shutdown of a dragline at the Curragh coal mine.

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