Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wesfarmers Ltd (WFAFF, Financial) reported a 3.7% increase in net profit after tax to $2.6 billion.
- Operating cash flows increased by 9.9% to $4.6 billion, demonstrating strong financial health.
- Kmart Group's performance was a standout with earnings growth of nearly 25%, highlighting its market-leading value.
- The Board resolved to pay a fully franked final dividend of $1.07 per share, bringing the total dividend for the year to $1.98 per share, a 3.7% increase.
- Bunnings continued to grow sales and earnings in challenging market conditions, supported by innovation in product ranges and supply chain investments.
Negative Points
- WesCEF's earnings declined by 34.2% to $440 million due to lower global commodity prices and higher WA natural gas costs.
- Catch reported a loss of $96 million for the year, including an $18 million non-cash impairment and $5 million in restructuring costs.
- The Health division's return on capital remains below the company's hurdle rate, despite ongoing investments and acquisitions.
- The competitive environment in Australian e-commerce retail is intensifying, impacting the profitability of Catch.
- The industrial sector faces challenges with subdued market pricing and higher unit costs of production, particularly in the lithium segment.
Q & A Highlights
Q: Can you provide an update on Bunnings' store growth and capital expenditure plans?
A: (Michael Schneider, Managing Director - Bunnings Group) We aim for 10% space growth over the next five years. However, significant construction projects have slowed capital spend. We are focusing on measured and disciplined progress with projects like French's Forest and Tempe. Additionally, we are driving space productivity within existing stores by optimizing categories like automotive and leveraging partnerships like Beaumont Tiles.
Q: How much more productivity do you expect from retail businesses over the next 12 months?
A: (Michael Schneider, Managing Director - Bunnings Group) We are focusing on streamlining operations and leveraging technology to improve productivity. We expect to redeploy around one million hours into service in stores over the next year. (Sarah Hunter, Managing Director - Officeworks) We continue to modernize and simplify our business, investing in technology and process improvements. (Ian Bailey, Managing Director - Kmart Group) We see significant productivity improvements from integrating Kmart and Target, focusing on efficiencies in inventory flow and store operations.
Q: What are the top three priorities for Bunnings' growth over the next five years?
A: (Michael Schneider, Managing Director - Bunnings Group) Growth will come from category expansion, particularly in automotive and tools, rural and regional ranging, and leveraging online capabilities. We are also focusing on improving space productivity within stores and driving the productivity agenda to optimize inventory and operational efficiencies.
Q: How is Kmart Group performing in the first eight weeks of FY25, and what is the outlook for earnings growth?
A: (Ian Bailey, Managing Director - Kmart Group) Both Kmart and Target are growing in the first eight weeks of FY25. We see further productivity savings offsetting inflationary impacts. The competitive landscape will influence earnings growth, but we aim to maintain and grow both revenue and profitability over time.
Q: What is the strategy for Wesfarmers Health, given its current return on capital?
A: (Robert Scott, CEO) Health is a long-term investment, and we expect it to achieve satisfactory returns over five years. We have made significant investments in capability building, and the focus is now on converting these investments into profit growth and improved returns. (Emily Amos, Managing Director - Health) We are seeing improvements in underlying earnings and are focused on driving value for consumers through price reductions and promotional activities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
