Coles drives Wesfarmers’ profit up 11 per cent to $2.126 billion

Jane Harper
August 16, 2012
Herald Sun

ANOTHER strong performance from supermarket Coles has helped drive retail giant Wesfarmers’ full-year net profit up 11 per cent to $2.126 billion.

Total revenue across Wesfarmers for the year to June rose 6 per cent to $58.1 billion, up from $54.9 billion last year.

Coles, which has outpaced larger rival Woolworths in sales for the past three years, reported a 16.3 per cent rise in earnings to $1.3 billion.

The result sent Wesfarmers’ share price up nearly 3 per cent to a 15-month high of $33.48 by midday.

Managing director Richard Goyder said an investment in lowering prices, along with store refurbishments and an improved network, had driven the strong result at Coles.

He said the retail sector was expected to remain subdued, but the group was well-placed to withstand the continuing headwinds.

“The group has a strong portfolio of businesses and a healthy balance sheet providing a good outlook for growth, both from within the existing group and from potential business expansion opportunities,” Mr Goyder said.

Discretionary department store Kmart, which has been undergoing an extensive turnaround, chalked up a strong result with earnings up 31.4 per cent to $268 million.

Mr Goyder said the business had now enjoyed 10 consecutive quarters of growth in transactions, with the improvement driven by low prices and business efficiencies.

But Target, which is also undergoing a turnaround, continued to struggle in a tough trading environment, with earnings down 12.9 per cent to $244 million.

“Underlying earnings were maintained through a focus on the profitability of promotions and lower levels of clearance activity due to better inventory management,” the company said.

The Bunnings home improvement chain reported a 4.9 per cent rise in earnings to $841 million, while Officeworks’ earnings increased 6.3 per cent to $85 million.

Wesfarmers resources division increased earnings by 19 per cent to $439 million, driven by increased revenue due to higher export coal prices in the first half, and improved sales volumes in the second half.

The chemicals, energy and fertilisers division reported earnings of $258 million, up 7.1 per cent after excluding $42 million of insurance proceeds in the previous year relating to the 2009 Varanus Island gas outage.

The industrial and safety division saw earnings rise 14.5 per cent to $190 million, supported by strong demand from the resources and engineering construction sectors.