Profits at Wesfarmers go up, up, up

Despite higher freight and employment costs, retail businesses flourish, led by a 21 percent rise in earnings by Coles

By Rob McKay | August 18, 2011

Leading freight transport user Wesfarmers saw its 2010/11 net profit after tax soar 22.8 percent to $1.92 billion.

Despite difficult trading conditions, lower asking prices and the floods, earnings for its retail businesses rose 8.2 percent.

For Coles, earnings before interest and tax were up 21.2 percent at 1.17 billion.

Bunnings was up 10.2 percent to $802 million.

This was bolstered by strong growth in earnings for the Industrial & Safety and Chemicals, Energy & Fertilisers divisions of 20.3 percent and 44.4 percent respectively to $138 million and $196 million.

The bullish results come seemingly against the odds, given the well-reported lack of consumer confidence and higher costs, though the high dollar may have eased the cost of imported goods somewhat.

The group saw its freight and other related expenditure rise about 9 percent to $895 million from $822 million the previous financial year.

Employment costs rose to $7.1 billion from $6.8 billion.

The Wesfarmers share of industrial gases firm Air Liquide WA, a major truck user in which it has a 40 percent stake, was $6 million, unchanged from last year.

"Strong capital expenditure across the group reflects the depth of growth initiatives underway as we continue to invest in strengthening retail networks and expanding production capacity in the resources and industrial divisions," Managing Director Richard Goyder says.

Its insurance arm saw earnings before interest and tax fall to $20 million on revenue of $1.7 billion, from last year’ $122 million, a plunge of 83.6 percent.

This was "driven by the unprecedented number of catastrophe events in Australia and New Zealand" and increased reinsurance costs.

See the September edition of ATN, which will examine the rising price of insurance.

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