Wesfarmers Ltd has reported a 46 percent rise in net profit saying its businesses have weathered the global economic crisis but as expected its earnings per share have slumped.
Wesfarmers Ltd has reported a 46 percent rise in net profit saying its businesses have weathered the global economic crisis but as expected its earnings per share have slumped.
Wesfarmers announced a 46.3 per cent lift in net profit to $879 million for the half-year ended 31 December 2008, compared to $601 million for the prior corresponding period.
The result was in the upper range of the profit guidance issued in Janaury and includes $125 million after tax in write-downs and provisions.
"Despite the impact of a tougher consumer environment, the group's retail businesses have generally weathered the downturn well and the Coles turnaround is gaining momentum," managing director, Richard Goyder, said.
While net profit increased, Wesfarmers issued extra shares during the year to help reduce the debt it took on as part of the Coles acquisition.
Consequently its earnings per share fell from 126.4 cents to 106.1 cents.
In addition, the group cut its interim dividend to 50 cents, fully franked, down from 65 cents for the same period in 2007/08, as foreshadowed last month.
Mr Goyder said that the economic environment would be challenging for most of the group's businesses over 2009.
"Notwithstanding, I expect the turnaround of Coles to continue to gather pace over the next 12 months, he said."
Coles first half revenue was $14.6 billion compared to $2.9 billion in the prior period.
Earnings before interest and tax (EBIT) were $430.6 million, prior to non-trading items of $65 million for property valuation writedowns, compared to $130 million in the prior corresponding period.
Mr Goyder said there were signs Wesfarmers' five-year plan to turnaround Coles was gaining traction.
"The business achieved a record Christmas trading period driven by its fresh offer," he said.
"We've also seen the upward trend continue since 31 December 2008.
"Liquor sales have grown while the convenience business continues to show strong non-fuel sales growth."
Wesfarmers' lucrative hardware chain Bunnings reported a 13.8 per cent lift in EBIT, driven by strong performances across all states.
"Bunnings has again delivered an impressive result as it continues to focus on strengthening its customer offer and delivering operational efficiencies," Mr Goyder said.
Wesfarmers' resources division posted EBIT of $686 million, up sharply from $112 million for the prior corresponding period.
The company said this strong performance was achieved largely due to strong export coal prices, and despite increased royalty payments and increased costs across the industry.
The industrial and safety division delivered EBIT growth of 11.5 per cent, with revenue up seven per cent, reflecting sales growth across most of the division's businesses.
The company said EBIT for both the energy, and chemicals and fertilisers divisions was impacted by a gas outage at the Varanus Island gas processing facilities off Western Australia, which reduced Wesfarmers' ammonia production volumes.
These divisions were also hit by significant falls in commodity prices.
Its insurance division recorded solid revenue growth of 8.1 per cent despite challenging external conditions including generally higher claim levels, with storms leading to increased crop claims.
The group's net debt to equity ratio at the end of December was 48.9 per cent.
Assuming a debt repayment of $2.9 billion as a result of its recent equity raising - excluding proceeds from the yet-to-be-completed retail component - the net debt to equity ratio at the end of calendar 2008 would have been 29.2 per cent.
Wesfarmers substantially increased its debt level with the $20 billion acquisition of Coles in 2007, the largest completed takeover in Australia's corporate history.
Shares in Wesfarmers were up 26 cents, or 1.61 per cent, at $16.41 at 1138 AEDT.
