Varanus hits Wesfarmers in WA

Wesfarmers has confirmed a sharp downturn in earnings in two of its Perth-based business units, with the energy and chemicals & fertilizer divisions both adversely affected by last year's Varanus Island gas explosion.

The half-year earnings for the energy division fell from $48 million in 2007-08 to $30 million in 2008-09.

More dramatically, the earnings of the chemicals and fertilizer division fell from $40 million in the first half of 2007-08 to $4 million in 2008-09.

The Varanus island gas outage on 3rd June 2008, which cut one-third of WA's gas supplies, reduced production at CSBP's Kwinana operations.

This led to the higher costs of restarting the plant and the purchase of more expensive imported ammonia to meet customer demand.

The gas supply issues also disrupted the Energy division's businesses. Another factor contributing to the poor performance was the decline in international LPG prices which impacted the inventory carrying values and selling prices.

Wesfarmers said the outlook is positive for the chemicals and fertilizer division with fertilizer sales expected to be strong in the second half resulting in a recovery in earnings for the full year.

Contributions from the group's Kwinana LNG project will also increase in the second half as LNG production and sales progressively increase.